Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, European Reliance General Insurance Company SA (ATH:EUPIC) has paid dividends to shareholders, and these days it yields 3.5%. Should it have a place in your portfolio? Let’s take a look at European Reliance General Insurance in more detail.
See our latest analysis for European Reliance General Insurance
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share amount increased over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will the company be able to keep paying dividend based on the future earnings growth?
How well does European Reliance General Insurance fit our criteria?
The current trailing twelve-month payout ratio for the stock is 20.7%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider European Reliance General Insurance as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, European Reliance General Insurance produces a yield of 3.5%, which is high for Insurance stocks but still below the market’s top dividend payers.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in European Reliance General Insurance for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three pertinent factors you should further research: