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Insperity, Inc. (NYSE:NSP) will increase its dividend on the 23rd of June to US$0.52. This will take the annual payment from 1.8% to 3.9% of the stock price, which is above what most companies in the industry pay.
Insperity Is Paying Out More Than It Is Earning
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Insperity's earnings. This means that a large portion of its earnings are being retained to grow the business.
The next 12 months is set to see EPS grow by 20.2%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 117% over the next year.
Insperity Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from US$0.30 to US$1.80. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Insperity has seen EPS rising for the last five years, at 16% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
We Really Like Insperity's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Insperity that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.