On the 29 March 2019, The Hanover Insurance Group, Inc. (NYSE:THG) will be paying shareholders an upcoming dividend amount of US$0.60 per share. However, investors must have bought the company’s stock before 14 March 2019 in order to qualify for the payment. That means you have only 2 days left! Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Hanover Insurance Group’s most recent financial data to examine its dividend characteristics in more detail.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
Does Hanover Insurance Group pass our checks?
Hanover Insurance Group has a trailing twelve-month payout ratio of 39%, which means that the dividend is covered by earnings. However, going forward, analysts expect THG’s payout to fall to 30% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.2%. However, EPS should increase to $8.11, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of THG it has increased its DPS from $0.45 to $2.4 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes THG a true dividend rockstar.
In terms of its peers, Hanover Insurance Group produces a yield of 2.0%, which is on the low-side for Insurance stocks.
Keeping in mind the dividend characteristics above, Hanover Insurance Group is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three pertinent aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for THG’s future growth? Take a look at our free research report of analyst consensus for THG’s outlook.
- Valuation: What is THG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether THG is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.