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Some investors rely on dividends to increase their wealth, and if you are one of those dividend detectors, you might be intrigued to know that Progressive society (NYSE: PGR) is set to be ex-dividend in just 3 days. This means that investors who buy shares on or after January 7 will not receive the dividend, which will be paid on January 15.
Progressive’s next dividend will be US $ 4.60 per share, and over the past 12 months, the company has paid a total of US $ 4.90 per share. Based on the value of last year’s payouts, the Progressive stock has a trailing yield of approximately 5.0% on the current stock price of $ 98.88. We love to see companies pay a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden goose! So we need to check whether dividend payments are covered and whether profits are increasing.
Check out our latest review for Progressive
If a company pays more in dividends than it earns, then the dividend could become unsustainable – this is not an ideal situation. Fortunately, Progressive’s payout ratio is modest, at just 31% of earnings.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it is easier to raise the dividend when earnings rise. If profits decline and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. That’s why it’s heartwarming to see Progressive’s profits skyrocket, rising 32% per year over the past five years.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Progressive has generated dividend growth of 41% per year on average over the past 10 years. Both earnings per share and dividends have grown rapidly lately, which is great to see.
Final takeaway
Is Progressive worth buying for its dividend? When companies grow rapidly and keep the majority of the profits within the company, it is usually a sign that reinvesting the profits creates more value than paying dividends to shareholders. It is one of the most attractive investment combinations according to this analysis because it can create substantial value for long-term investors. We think this is a pretty appealing combination and would be interested in taking a closer look at Progressive.
So while Progressive looks good from a dividend standpoint, it’s still worth being up to date with the risks involved in this action. We have identified 3 warning signs with Progressive (at least 1 which cannot be ignored), and understanding them should be part of your investment process.
However, we wouldn’t recommend just buying the first dividend-paying stock you see. Here is a list of interesting dividend stocks with a yield above 2% and a dividend coming soon.
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This Simply Wall St article is general in nature. It is not a recommendation to buy or sell stocks, and does not take into account your goals or your financial situation. We aim to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative information. Simply Wall St has no position in any of the stocks mentioned.
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