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It looks like Selective Insurance Group, Inc. (NASDAQ:SIGI) is about to go ex-dividend in the next two days. Ex-dividend means that investors that purchase the stock on or after the 12th of November will not receive this dividend, which will be paid on the 1st of December.
Selective Insurance Group's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.00 per share. Based on the last year's worth of payments, Selective Insurance Group has a trailing yield of 1.8% on the current stock price of $55.27. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
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 paid out a comfortable 27% of its profit last year.
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.
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. With that in mind, we're encouraged by the steady growth at Selective Insurance Group, with earnings per share up 6.0% on average 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. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Selective Insurance Group for the upcoming dividend? 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. Overall, Selective Insurance Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for Selective Insurance Group? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.
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