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The board of The Travelers Companies, Inc. (NYSE:TRV) has announced that it will be paying its dividend of $0.93 on the 30th of September, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 2.3%, which is in line with the average for the industry.
See our latest analysis for Travelers Companies
Travelers Companies' Earnings Easily Cover The Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Travelers Companies was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 11.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.
Travelers Companies Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from $1.64 total annually to $3.72. This means that it has been growing its distributions at 8.5% per annum 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 Has Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Travelers Companies has been growing its earnings per share at 8.0% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Travelers Companies' prospects of growing its dividend payments in the future.
Travelers Companies Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Travelers Companies is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 16 Travelers Companies analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.