Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Everest Re Group, Ltd. (NYSE:RE) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 1st of December to receive the dividend, which will be paid on the 23rd of December.
Everest Re Group's next dividend payment will be US$1.55 per share, on the back of last year when the company paid a total of US$6.20 to shareholders. Looking at the last 12 months of distributions, Everest Re Group has a trailing yield of approximately 2.6% on its current stock price of $237.49. If you buy this business for its dividend, you should have an idea of whether Everest Re Group's dividend is reliable and sustainable. So we need to investigate whether Everest Re Group can afford its dividend, and if the dividend could grow.
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. Everest Re Group paid out a comfortable 37% of its profit last year.
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.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Everest Re Group's earnings per share have fallen at approximately 8.7% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Everest Re Group has lifted its dividend by approximately 12% a year on average.
The Bottom Line
Is Everest Re Group an attractive dividend stock, or better left on the shelf? Everest Re Group's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. We think there are likely better opportunities out there.
However if you're still interested in Everest Re Group as a potential investment, you should definitely consider some of the risks involved with Everest Re Group. Our analysis shows 1 warning sign for Everest Re Group and you should be aware of this before buying any shares.
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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