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It looks like Primerica, Inc. (NYSE:PRI) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Primerica's shares before the 22nd of May to receive the dividend, which will be paid on the 13th of June.
The company's upcoming dividend is US$1.04 a share, following on from the last 12 months, when the company distributed a total of US$4.16 per share to shareholders. Last year's total dividend payments show that Primerica has a trailing yield of 1.5% on the current share price of US$278.97. If you buy this business for its dividend, you should have an idea of whether Primerica's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
We've discovered 2 warning signs about Primerica. View them for free.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Primerica paid out just 18% 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.
Check out our latest analysis for Primerica
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Primerica's earnings have been skyrocketing, up 21% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Primerica has delivered an average of 24% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
From a dividend perspective, should investors buy or avoid Primerica? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Primerica ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.