- Oops!Something went wrong.Please try again later.
Readers hoping to buy The Travelers Companies, Inc. (NYSE:TRV) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Travelers Companies' shares before the 9th of June in order to be eligible for the dividend, which will be paid on the 30th of June.
The company's next dividend payment will be US$0.88 per share, on the back of last year when the company paid a total of US$3.52 to shareholders. Based on the last year's worth of payments, Travelers Companies stock has a trailing yield of around 2.2% on the current share price of $160. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
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. Travelers Companies paid out a comfortable 31% 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?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Travelers Companies's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Travelers Companies has lifted its dividend by approximately 9.3% a year on average.
Is Travelers Companies worth buying for its dividend? Earnings per share have been flat in recent years, although Travelers Companies reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Travelers Companies more closely.
On that note, you'll want to research what risks Travelers Companies is facing. In terms of investment risks, we've identified 1 warning sign with Travelers Companies and understanding them should be part of your investment process.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.