Income Investors Should Know That Donegal Group Inc. (NASDAQ:DGIC.A) Goes Ex-Dividend Soon
Readers hoping to buy Donegal Group Inc. (NASDAQ:DGIC.A) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Donegal Group investors that purchase the stock on or after the 31st of July will not receive the dividend, which will be paid on the 15th of August.
The company's upcoming dividend is US$0.17 a share, following on from the last 12 months, when the company distributed a total of US$0.68 per share to shareholders. Calculating the last year's worth of payments shows that Donegal Group has a trailing yield of 4.5% on the current share price of $14.96. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Donegal Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Donegal Group's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.
Click here to see how much of its profit Donegal Group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Donegal Group was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Donegal Group has lifted its dividend by approximately 3.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Remember, you can always get a snapshot of Donegal Group's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Should investors buy Donegal Group for the upcoming dividend? It's hard to get used to Donegal Group paying a dividend despite reporting a loss over the past year. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
If you want to look further into Donegal Group, it's worth knowing the risks this business faces. To help with this, we've discovered 2 warning signs for Donegal Group that you should be aware of before investing in their shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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