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Selective Insurance Group, Inc. (NASDAQ:SIGI) Passed Our Checks, And It's About To Pay A US$0.25 Dividend

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Simply Wall St
·3 min read
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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Selective Insurance Group, Inc. (NASDAQ:SIGI) is about to go ex-dividend in just three days. You will need to purchase shares before the 11th of February to receive the dividend, which will be paid on the 1st of March.

Selective Insurance Group's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Last year's total dividend payments show that Selective Insurance Group has a trailing yield of 1.5% on the current share price of $64.72. If you buy this business for its dividend, you should have an idea of whether Selective Insurance Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Selective Insurance Group

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. Selective Insurance Group is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Selective Insurance Group earnings per share are up 7.1% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Selective Insurance Group has increased its dividend at approximately 6.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Has Selective Insurance Group got what it takes to maintain its dividend payments? Selective Insurance Group has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Selective Insurance Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

On that note, you'll want to research what risks Selective Insurance Group is facing. For example - Selective Insurance Group has 1 warning sign we think you should be aware of.

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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.