Here's What We Like About Erie Indemnity's (NASDAQ:ERIE) Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Erie Indemnity Company (NASDAQ:ERIE) is about to go ex-dividend in just four days. You can purchase shares before the 2nd of October in order to receive the dividend, which the company will pay on the 20th of October.
Erie Indemnity's next dividend payment will be US$0.96 per share, on the back of last year when the company paid a total of US$3.86 to shareholders. Based on the last year's worth of payments, Erie Indemnity has a trailing yield of 1.9% on the current stock price of $204.43. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Erie Indemnity can afford its dividend, and if the dividend could grow.
View our latest analysis for Erie Indemnity
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. Erie Indemnity is paying out an acceptable 67% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see how much of its profit Erie Indemnity paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Erie Indemnity's earnings per share have risen 12% per annum over the last five years.
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, Erie Indemnity has lifted its dividend by approximately 7.9% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Erie Indemnity an attractive dividend stock, or better left on the shelf? Erie Indemnity has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Erie Indemnity ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Want to learn more about Erie Indemnity's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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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