Stewart Information Services (NYSE:STC) Will Pay A Larger Dividend Than Last Year At $0.475

The board of Stewart Information Services Corporation (NYSE:STC) has announced that the dividend on 29th of September will be increased to $0.475, which will be 5.6% higher than last year's payment of $0.45 which covered the same period. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Stewart Information Services

Stewart Information Services' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 97% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, earnings per share is forecast to rise by 66.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Stewart Information Services Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.10, compared to the most recent full-year payment of $1.80. This works out to be a compound annual growth rate (CAGR) of approximately 34% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Stewart Information Services May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Unfortunately, Stewart Information Services' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Stewart Information Services' Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Stewart Information Services you should be aware of, and 1 of them is significant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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