Is It Smart To Buy The Travelers Companies, Inc. (NYSE:TRV) Before It Goes Ex-Dividend?

By
Simply Wall St
Published
December 03, 2021
NYSE:TRV
Source: Shutterstock

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The Travelers Companies, Inc. (NYSE:TRV) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Travelers Companies' shares before the 9th of December to receive the dividend, which will be paid on the 31st of December.

The company's next dividend payment will be US$0.88 per share, and in the last 12 months, the company paid a total of US$3.52 per share. Looking at the last 12 months of distributions, Travelers Companies has a trailing yield of approximately 2.4% on its current stock price of $149.16. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Travelers Companies

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Travelers Companies has a low and conservative payout ratio of just 24% of its income after tax.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NYSE:TRV Historic Dividend December 4th 2021

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Travelers Companies, with earnings per share up 6.0% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Travelers Companies has increased its dividend at approximately 9.3% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Is Travelers Companies worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Travelers Companies appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks Travelers Companies is facing. For example, we've found 1 warning sign for Travelers Companies that we recommend you consider before investing in the business.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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