Have you been keeping an eye on The Hanover Insurance Group Inc’s (NYSE:THG) upcoming dividend of US$0.54 per share payable on the 28 September 2018? Then you only have 3 days left before the stock starts trading ex-dividend on the 13 September 2018. Should you diversify into Hanover Insurance Group and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does Hanover Insurance Group fare?
The current trailing twelve-month payout ratio for the stock is 36.6%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect THG’s payout to fall to 27.2% of its earnings, which leads to a dividend yield of around 1.9%. However, EPS should increase to $10.11, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. THG has increased its DPS from $0.40 to $2.16 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes THG a true dividend rockstar.
Relative to peers, Hanover Insurance Group produces a yield of 1.8%, which is on the low-side for Insurance stocks.
With this in mind, I definitely rank Hanover Insurance Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three pertinent factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for THG’s future growth? Take a look at our free research report of analyst consensus for THG’s outlook.
- Valuation: What is THG 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 THG 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 email@example.com.