Read This Before Considering Employers Holdings Inc (NYSE:EIG) For Its Upcoming US$0.20 Dividend
Attention dividend hunters! Employers Holdings Inc (NYSE:EIG) will be distributing its dividend of US$0.20 per share on the 21 November 2018, and will start trading ex-dividend in 4 days time on the 06 November 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Employers Holdings’s latest financial data to analyse its dividend attributes.
See our latest analysis for Employers Holdings
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 their annual yield among the top 25% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has it increased its dividend per share amount over the past?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
How does Employers Holdings fare?
Employers Holdings has a trailing twelve-month payout ratio of 17%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 32%, leading to a dividend yield of around 1.7%. However, EPS is forecasted to fall to $3.4 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of EIG it has increased its DPS from $0.24 to $0.80 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. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, Employers Holdings generates a yield of 1.7%, which is on the low-side for Insurance stocks.
Next Steps:
Considering the dividend attributes we analyzed above, Employers Holdings is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. There are three essential aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for EIG’s future growth? Take a look at our free research report of analyst consensus for EIG’s outlook.
Valuation: What is EIG 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 EIG 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 editorial-team@simplywallst.com.
