The Travelers Companies, Inc. (NYSE:TRV) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 9th of September in order to receive the dividend, which the company will pay on the 30th of September.
Travelers Companies's next dividend payment will be US$0.82 per share, and in the last 12 months, the company paid a total of US$3.28 per share. Looking at the last 12 months of distributions, Travelers Companies has a trailing yield of approximately 2.2% on its current stock price of $147.57. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. 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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Travelers Companies's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Travelers Companies has lifted its dividend by approximately 11% a year on average.
The Bottom Line
Should investors buy Travelers Companies for the upcoming dividend? Travelers Companies has seen its earnings per share stagnate in recent years, although the company reinvests more than half of its profits in the business, which could bode well for its future prospects. In summary, Travelers Companies appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Ever wonder what the future holds for Travelers Companies? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top 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 firstname.lastname@example.org. 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.