Travelers Companies (NYSE:TRV) Is Increasing Its Dividend To US$0.88

The Travelers Companies, Inc.'s (NYSE:TRV) dividend will be increasing to US$0.88 on 30th of September. The announced payment will take the dividend yield to 2.3%, which is in line with the average for the industry.

View our latest analysis for Travelers Companies

Travelers Companies' Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Travelers Companies' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 18.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 30%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Travelers Companies Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the first annual payment was US$1.44, compared to the most recent full-year payment of US$3.52. This means that it has been growing its distributions at 9.3% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Travelers Companies Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Travelers Companies has grown earnings per share at 7.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Travelers Companies' prospects of growing its dividend payments in the future.

Travelers Companies Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Travelers Companies that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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