Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. James River Group Holdings Ltd (NASDAQ:JRVR) has paid a dividend to shareholders in the last few years. It currently yields 3.1%. Does James River Group Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does James River Group Holdings pass our checks?
The current trailing twelve-month payout ratio for the stock is 83%, which means that the dividend is covered by earnings. However, going forward, analysts expect JRVR’s payout to fall to 51% of its earnings, which leads to a dividend yield of 3.5%. However, EPS should increase to $2.52, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider James River Group Holdings as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, James River Group Holdings produces a yield of 3.1%, which is high for Insurance stocks but still below the market’s top dividend payers.
If James River Group Holdings is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for JRVR’s future growth? Take a look at our free research report of analyst consensus for JRVR’s outlook.
- Valuation: What is JRVR 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 JRVR is currently mispriced by the market.
- 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.