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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 3 days. If you purchase the stock on or after the 18th of December, you won't be eligible to receive this dividend, when it is paid on the 29th of December.
Erie Indemnity's next dividend payment will be US$2.00 per share. Last year, in total, the company distributed US$3.86 to shareholders. Based on the last year's worth of payments, Erie Indemnity stock has a trailing yield of around 1.7% on the current share price of $233.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Erie Indemnity
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 is paying out an acceptable 70% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit Erie Indemnity paid out over the last 12 months.
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. Fortunately for readers, Erie Indemnity's earnings per share have been growing at 12% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Erie Indemnity has lifted its dividend by approximately 7.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Erie Indemnity an attractive dividend stock, or better left on the shelf? Earnings per share are growing at an attractive rate, and Erie Indemnity is paying out a bit over half its profits. In summary, Erie Indemnity appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.