Safety Insurance Group, Inc.’s (NASDAQ:SAFT) investors are due to receive a payment of US$0.90 per share on 15th of June. This makes the dividend yield 4.3{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6}, which will augment investor returns quite nicely.

See our latest analysis for Safety Insurance Group

Safety Insurance Group’s Earnings Easily Cover the Distributions

If the payments aren’t sustainable, a high yield for a few years won’t matter that much. However, Safety Insurance Group’s earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 39.3{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6} if recent trends continue. If the dividend continues on this path, the payout ratio could be 23{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6} by next year, which we think can be pretty sustainable going forward.

NasdaqGS:SAFT Historic Dividend May 12th 2021

Safety Insurance Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the dividend has gone from US$2.00 to US$3.60. This implies that the company grew its distributions at a yearly rate of about 6.1{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6} over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

The company’s investors will be pleased to have been receiving dividend income for some time. Safety Insurance Group has impressed us by growing EPS at 39{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6} per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Safety Insurance Group’s Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we’ve identified 1 warning sign for Safety Insurance Group that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

Promoted
When trading Safety Insurance Group or any other investment, use the platform considered by many to be the Professional’s Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.

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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Previous post Global Digital Education Market (2020 to 2026)
Next post Fashion To Determine