Read This Before Considering Stewart Information Services Corporation (NYSE:STC) For Its Upcoming US$0.525 Dividend
Readers hoping to buy Stewart Information Services Corporation (NYSE:STC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Meaning, you will need to purchase Stewart Information Services' shares before the 15th of December to receive the dividend, which will be paid on the 30th of December.
The company's next dividend payment will be US$0.525 per share. Last year, in total, the company distributed US$2.10 to shareholders. Calculating the last year's worth of payments shows that Stewart Information Services has a trailing yield of 2.9% on the current share price of US$72.44. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Stewart Information Services can afford its dividend, and if the dividend could grow.
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. Stewart Information Services paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies.
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.
Check out our latest analysis for Stewart Information Services
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. With that in mind, we're not enthused to see that Stewart Information Services's earnings per share have remained 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Stewart Information Services has lifted its dividend by approximately 7.7% a year on average.
To Sum It Up
Has Stewart Information Services got what it takes to maintain its dividend payments? Stewart Information Services has been struggling to generate growth while also paying out more than half of its earnings to shareholders as dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.
Ever wonder what the future holds for Stewart Information Services? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.