Donegal Group (NASDAQ:DGIC.B) Could Be A Buy For Its Upcoming Dividend
It looks like Donegal Group Inc. (NASDAQ:DGIC.B) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 31st of July will not receive this dividend, which will be paid on the 17th of August.
Donegal Group's upcoming dividend is US$0.13 a share, following on from the last 12 months, when the company distributed a total of US$0.53 per share to shareholders. Last year's total dividend payments show that Donegal Group has a trailing yield of 4.7% on the current share price of $11.25. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Donegal Group has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Donegal Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Donegal Group paid out 52% of its earnings to investors last year, a normal payout level for most businesses.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Donegal Group's earnings per share have been growing at 12% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Donegal Group has lifted its dividend by approximately 2.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Donegal Group is keeping back more of its profits to grow the business.
Final Takeaway
Is Donegal Group an attractive dividend stock, or better left on the shelf? Earnings per share are growing nicely, and Donegal Group is paying out a percentage of its earnings that is around the average for dividend-paying stocks. In summary, Donegal Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Wondering what the future holds for Donegal Group? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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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