Unum Group (NYSE:UNM) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 26th of July to receive the dividend, which will be paid on the 16th of August.
Unum Group's next dividend payment will be US$0.28 per share, and in the last 12 months, the company paid a total of US$1.04 per share. Based on the last year's worth of payments, Unum Group stock has a trailing yield of around 3.5% on the current share price of $32.95. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. That's why it's good to see Unum Group paying out a modest 43% of its earnings.
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.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Unum Group's 5.3% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Unum Group has delivered 14% dividend growth per year on average over the past 10 years.
The Bottom Line
From a dividend perspective, should investors buy or avoid Unum Group? Unum Group's earnings per share are down over the past 5 years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. It doesn't appear an outstanding opportunity, but could be worth a closer look.
Curious what other investors think of Unum Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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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.