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National General Holdings Corp. (NASDAQ:NGHC)'s Could Be A Buy For Its Upcoming Dividend

Simply Wall St

National General Holdings Corp. (NASDAQ:NGHC) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 1st of October to receive the dividend, which will be paid on the 16th of October.

National General Holdings's next dividend payment will be US$0.05 per share, on the back of last year when the company paid a total of US$0.2 to shareholders. Calculating the last year's worth of payments shows that National General Holdings has a trailing yield of 0.9% on the current share price of $23.52. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether National General Holdings has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for National General Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. National General Holdings has a low and conservative payout ratio of just 7.7% of its income after tax.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqGM:NGHC Historical Dividend Yield, September 26th 2019

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see National General Holdings's earnings have been skyrocketing, up 28% per annum for the past five years.

We'd also point out that National General Holdings issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, six years ago, National General Holdings has lifted its dividend by approximately 31% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is National General Holdings worth buying for its dividend? Companies like National General Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, National General Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Ever wonder what the future holds for National General Holdings? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.