Don't Race Out To Buy Employers Holdings, Inc. (NYSE:EIG) Just Because It's Going Ex-Dividend
Employers Holdings, Inc. (NYSE:EIG) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Employers Holdings' shares before the 28th of February in order to receive the dividend, which the company will pay on the 15th of March.
The company's next dividend payment will be US$0.26 per share. Last year, in total, the company distributed US$1.04 to shareholders. Based on the last year's worth of payments, Employers Holdings stock has a trailing yield of around 2.4% on the current share price of $43.17. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Employers Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Employers Holdings
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. Employers Holdings paid out 59% of its earnings to investors last year, a normal payout level for most businesses.
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?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Employers Holdings's earnings per share have dropped 11% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Employers Holdings has lifted its dividend by approximately 16% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
Final Takeaway
Is Employers Holdings 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. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
So if you're still interested in Employers Holdings despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To help with this, we've discovered 1 warning sign for Employers Holdings that you should be aware of before investing in their shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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