Safety Insurance Group (NASDAQ:SAFT) Will Pay A Dividend Of $0.90
The board of Safety Insurance Group, Inc. (NASDAQ:SAFT) has announced that it will pay a dividend on the 15th of September, with investors receiving $0.90 per share. Based on this payment, the dividend yield on the company's stock will be 5.0%, which is an attractive boost to shareholder returns.
View our latest analysis for Safety Insurance Group
Safety Insurance Group Doesn't Earn Enough To Cover Its Payments
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
EPS is set to fall by 11.2% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 179%, which could put the dividend under pressure if earnings don't start to improve.
Safety Insurance Group Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $2.40 in 2013 to the most recent total annual payment of $3.60. This means that it has been growing its distributions at 4.1% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Safety Insurance Group's EPS has fallen by approximately 11% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
Safety Insurance Group's Dividend Doesn't Look Sustainable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Safety Insurance Group's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Safety Insurance Group you should be aware of, and 2 of them are concerning. Is Safety Insurance Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
