Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Erie Indemnity Company (NASDAQ:ERIE) is about to go ex-dividend in just 4 days. You can purchase shares before the 3rd of April in order to receive the dividend, which the company will pay on the 21st of April.
Erie Indemnity's upcoming dividend is US$0.96 a share, following on from the last 12 months, when the company distributed a total of US$3.86 per share to shareholders. Last year's total dividend payments show that Erie Indemnity has a trailing yield of 2.4% on the current share price of $162.98. If you buy this business for its dividend, you should have an idea of whether Erie Indemnity's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Erie Indemnity paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Erie Indemnity's earnings per share have risen 14% 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. Erie Indemnity has delivered 7.9% dividend growth per year on average over the past ten years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Is Erie Indemnity an attractive dividend stock, or better left on the shelf? Earnings per share are growing nicely, and Erie Indemnity is paying out a percentage of its earnings that is around the average for dividend-paying stocks. We think this is a pretty attractive combination, and would be interested in investigating Erie Indemnity more closely.
Want to learn more about Erie Indemnity's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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