Investors who want to cash in on The National Security Group, Inc.’s (NASDAQ:NSEC) upcoming dividend of US$0.05 per share have only 4 days left to buy the shares before its ex-dividend date, 01 February 2019, in time for dividends payable on the 28 February 2019. Is this future income a persuasive enough catalyst for investors to think about National Security Group as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Does it pay an annual yield higher than 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 its earnings sufficient to payout dividend at the current rate?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does National Security Group fit our criteria?
The company currently pays out 20% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently 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.
When assessing the forecast sustainability of a dividend it is also worth considering 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. Dividend payments from National Security Group have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, National Security Group produces a yield of 1.6%, which is on the low-side for Insurance stocks.
Now you know to keep in mind the reason why investors should be careful investing in National Security Group for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three relevant aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for NSEC’s future growth? Take a look at our free research report of analyst consensus for NSEC’s outlook.
Valuation: What is NSEC 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 NSEC is currently mispriced by the market.
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.