Selective Insurance Group (NASDAQ:SIGI) Is Increasing Its Dividend To $0.30
Selective Insurance Group, Inc. (NASDAQ:SIGI) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of December to $0.30. This takes the annual payment to 1.3% of the current stock price, which unfortunately is below what the industry is paying.
Check out our latest analysis for Selective Insurance Group
Selective Insurance Group's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Even though Selective Insurance Group is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.
Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 0.009%, which makes us pretty comfortable with the sustainability of the dividend.
Selective Insurance Group Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was $0.52, compared to the most recent full-year payment of $1.20. This means that it has been growing its distributions at 8.7% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. However, Selective Insurance Group's EPS was effectively flat over the past five years, which could stop the company from paying more every year. With EPS growth hard to come by and the company not turning a profit, we wouldn't be particularly optimistic about the growth prospects for Selective Insurance Group's dividend in the future.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think Selective Insurance Group will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Selective Insurance Group that investors should take into consideration. Is Selective Insurance Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
