Essent Group (NYSE:ESNT) Is Paying Out A Larger Dividend Than Last Year
Essent Group Ltd.'s (NYSE:ESNT) dividend will be increasing from last year's payment of the same period to $0.28 on 22nd of March. This will take the annual payment to 2.1% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for Essent Group
Essent Group's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Essent Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 14.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.
Essent Group Is Still Building Its Track Record
Essent Group's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.60 in 2019 to the most recent total annual payment of $1.12. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
We Could See Essent Group's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. Essent Group has impressed us by growing EPS at 6.3% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Our Thoughts On Essent Group's Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Essent Group that you should be aware of before investing. Is Essent Group not quite the opportunity you were looking for? Why not check out our selection of top 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.
