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If you are an income investor, then Mercury General Corporation (NYSE:MCY) should be on your radar. Mercury General Corporation, together with its subsidiaries, engages in writing personal automobile insurance in the United States. Over the past 10 years, the US$3.2b market cap company has been growing its dividend payments, from $2.32 to $2.51. Currently yielding 4.4%, let's take a closer look at Mercury General's dividend profile.
View our latest analysis for Mercury General
What Is A Dividend Rock Star?
It is a stock that pays a consistent, reliable and competitive dividend over a long period of time, and is expected to continue to pay in the same manner many years to come. More specifically:
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Its annual yield is among the top 25% of dividend payers
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It consistently pays out dividend without missing a payment or significantly cutting payout
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Its dividend per share amount has increased over the past
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It can afford to pay the current rate of dividends from its earnings
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It is able to continue to payout at the current rate in the future
High Yield And Dependable
Mercury General currently yields 4.4%, which is high for Insurance stocks. But the real reason Mercury General stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. MCY has increased its DPS from $2.32 to $2.51 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Mercury General has a trailing twelve-month payout ratio of 80%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 61% which, assuming the share price stays the same, leads to a dividend yield of 4.4%. However, EPS should increase to $4.92, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Next Steps:
Investors of Mercury General can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then Mercury General is one worth keeping around. However, given 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. I've put together three essential aspects you should further research: