Travelers Companies' (NYSE:TRV) Shareholders Will Receive A Bigger Dividend Than Last Year

The Travelers Companies, Inc. (NYSE:TRV) will increase its dividend on the 31st of December to US$0.88. The announced payment will take the dividend yield to 2.1%, which is in line with the average for the industry.

View our latest analysis for Travelers Companies

Travelers Companies' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Travelers Companies was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 12.5%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 29%, which is comfortable for the company to continue in the future.

Travelers Companies Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the first annual payment was US$1.44, compared to the most recent full-year payment of US$3.52. This implies that the company grew its distributions at a yearly rate of about 9.3% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Has Growth Potential

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 8.1% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Travelers Companies' Dividend

Overall, a dividend increase is always good, and we think that Travelers Companies is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 13 analysts we track are forecasting for Travelers Companies for free with public analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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