There's A Lot To Like About Enact Holdings' (NASDAQ:ACT) Upcoming US$0.16 Dividend
It looks like Enact Holdings, Inc. (NASDAQ:ACT) is about to go ex-dividend in the next 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Enact Holdings' shares before the 27th of February in order to be eligible for the dividend, which will be paid on the 13th of March.
The company's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$1.35 to shareholders. Calculating the last year's worth of payments shows that Enact Holdings has a trailing yield of 5.0% on the current share price of US$26.94. If you buy this business for its dividend, you should have an idea of whether Enact Holdings's dividend is reliable and sustainable. So we need to investigate whether Enact Holdings can afford its dividend, and if the dividend could grow.
View our latest analysis for Enact Holdings
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Enact Holdings is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Enact Holdings has grown its earnings rapidly, up 22% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past two years, Enact Holdings has increased its dividend at approximately 55% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Is Enact Holdings an attractive dividend stock, or better left on the shelf? Companies like Enact Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Enact Holdings 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.
In light of that, while Enact Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Enact Holdings (1 is a bit concerning!) that deserve your attention before investing in the shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
