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Primerica, Inc. (NYSE:PRI) stock is about to trade ex-dividend in 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Primerica investors that purchase the stock on or after the 20th of November will not receive the dividend, which will be paid on the 12th of December.
The company's next dividend payment will be US$0.65 per share. Last year, in total, the company distributed US$2.60 to shareholders. Last year's total dividend payments show that Primerica has a trailing yield of 1.3% on the current share price of $207.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Primerica
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. Primerica paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Primerica's earnings per share have risen 12% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Primerica has lifted its dividend by approximately 19% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Has Primerica got what it takes to maintain its dividend payments? Companies like Primerica that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Primerica appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.