In This Article:
Cincinnati Financial Corporation (NASDAQ:CINF) will increase its dividend on the 15th of April to $0.87, which is 7.4% higher than last year's payment from the same period of $0.81. This will take the annual payment to 2.4% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Cincinnati Financial
Cincinnati Financial's Projected Earnings Seem Likely To Cover Future Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Cincinnati Financial's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to fall by 77.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 79%, which is definitely on the higher side.
Cincinnati Financial Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was $1.76, compared to the most recent full-year payment of $3.24. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Cincinnati Financial has been growing its earnings per share at 28% a 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 Cincinnati Financial's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Cincinnati Financial that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.