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Is It Smart To Buy Selective Insurance Group, Inc. (NASDAQ:SIGI) Before It Goes Ex-Dividend?

Simply Wall St

It looks like Selective Insurance Group, Inc. (NASDAQ:SIGI) is about to go ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 14th of August will not receive the dividend, which will be paid on the 3rd of September.

Selective Insurance Group's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$0.80 per share. Calculating the last year's worth of payments shows that Selective Insurance Group has a trailing yield of 1.0% on the current share price of $80.28. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Selective Insurance Group has been able to grow its dividends, or if the dividend might be cut.

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 paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

NasdaqGS:SIGI Historical Dividend Yield, August 9th 2019

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. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Selective Insurance Group's earnings per share have risen 16% 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 last 10 years, Selective Insurance Group has lifted its dividend by approximately 4.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Selective Insurance Group is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid Selective Insurance Group? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. 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.

Ever wonder what the future holds for Selective Insurance Group? See what the eight 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.