Don't Buy QBE Insurance Group Limited (ASX:QBE) For Its Next Dividend Without Doing These Checks
QBE Insurance Group Limited (ASX:QBE) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 22nd of August to receive the dividend, which will be paid on the 4th of October.
QBE Insurance Group's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$0.36 to shareholders. Looking at the last 12 months of distributions, QBE Insurance Group has a trailing yield of approximately 4.4% on its current stock price of A$12.04. 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 QBE Insurance Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for QBE Insurance Group
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. QBE Insurance Group is paying out an acceptable 72% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. QBE Insurance Group's earnings per share have fallen at approximately 17% a year over the previous 5 years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. QBE Insurance Group's dividend payments per share have declined at 7.3% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Final Takeaway
Is QBE Insurance Group an attractive dividend stock, or better left on the shelf? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. QBE Insurance Group doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Ever wonder what the future holds for QBE Insurance Group? See what the 12 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
