Shares of Erie Indemnity Company (NASDAQ:ERIE) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.84 per share, investors must have owned the shares prior to 08 October 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Erie Indemnity’s latest financial data to analyse its dividend attributes.
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Erie Indemnity pass our checks?
The company currently pays out 73% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of ERIE it has increased its DPS from $1.76 to $3.36 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Erie Indemnity has a yield of 2.7%, which is high for Insurance stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Erie Indemnity is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three essential aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for ERIE’s future growth? Take a look at our free research report of analyst consensus for ERIE’s outlook.
- Valuation: What is ERIE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ERIE is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.