Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 6 years ProAssurance Corporation (NYSE:PRA) has returned an average of 4.00% per year to investors in the form of dividend payouts. Does ProAssurance tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for ProAssurance
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does ProAssurance fit our criteria?
The company currently pays out 45.70% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect PRA’s payout to increase to 54.22% of its earnings, which leads to a dividend yield of around 2.23%. However, EPS is forecasted to fall to $2.16 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view ProAssurance as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, ProAssurance generates a yield of 10.65%, which is high for Insurance stocks.
Considering the dividend attributes we analyzed above, ProAssurance is definitely worth keeping an eye on for someone 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. I’ve put together three important aspects you should further examine:
- 1. Future Outlook: What are well-informed industry analysts predicting for PRA’s future growth? Take a look at our free research report of analyst consensus for PRA’s outlook.
- 2. Valuation: What is PRA 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 PRA is currently mispriced by the market.
- 3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.