Essent Group Ltd's Dividend Analysis
Assessing the Sustainability of Essent Group Ltd's Dividend Payout
Essent Group Ltd (NYSE:ESNT) recently announced a dividend of $0.28 per share, payable on 2024-03-22, with the ex-dividend date set for 2024-03-12. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Essent Group Ltd's dividend performance and assess its sustainability.
What Does Essent Group Ltd Do?
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Essent Group Ltd serves the housing finance industry by providing private mortgage insurance, reinsurance, risk management products and title insurance and settlement services to mortgage lenders, borrowers, and investors to support homeownership. It provides credit protection to lenders and mortgage investors by covering a portion of the unpaid principal balance of a mortgage and certain related expenses in the event of a default. By providing capital to mitigate mortgage credit risk, the company allows lenders to make additional mortgage financing available to prospective homeowners. Essent Group writes mortgage guaranty coverage in all 50 states and the District of Columbia.
A Glimpse at Essent Group Ltd's Dividend History
Essent Group Ltd has maintained a consistent dividend payment record since 2019. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Essent Group Ltd's Dividend Yield and Growth
As of today, Essent Group Ltd currently has a 12-month trailing dividend yield of 1.85% and a 12-month forward dividend yield of 2.08%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Essent Group Ltd's annual dividend growth rate was 16.00%. Based on Essent Group Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of Essent Group Ltd stock as of today is approximately 1.85%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Essent Group Ltd's dividend payout ratio is 0.15. Essent Group Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Essent Group Ltd's profitability 7 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Essent Group Ltd's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Essent Group Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Essent Group Ltd's revenue has increased by approximately 5.20% per year on average, a rate that underperforms than approximately 51.08% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Essent Group Ltd's earnings increased by approximately 18.80% per year on average, a rate that underperforms than approximately 30.36% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 8.70%, which underperforms than approximately 40.07% of global competitors.
Next Steps
In conclusion, while Essent Group Ltd's dividend payments, dividend growth rate, and payout ratio reflect a strong commitment to returning value to shareholders, the mixed performance in growth metrics calls for a cautious assessment of future dividend sustainability. Investors should consider the company's profitability, which remains robust, as a positive indicator. However, it's important to keep an eye on revenue and earnings growth rates relative to industry peers, as these factors will ultimately underpin the company's ability to maintain and grow dividends over the long term. As value investors, it is crucial to balance the attractive aspects of Essent Group Ltd's dividend with a comprehensive understanding of its overall financial health and market position. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener to find similar investment opportunities.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
