Yahoo Finance What To Know Before Buying QBE Insurance Group Limited (ASX:QBE) For Its Dividend
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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, QBE Insurance Group Limited (ASX:QBE) has paid dividends to shareholders, and these days it yields 4.5%. Let's dig deeper into whether QBE Insurance Group should have a place in your portfolio.
View our latest analysis for QBE Insurance Group
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Can it afford to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
Does QBE Insurance Group pass our checks?
The company currently pays out 84% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect QBE's payout to fall to 62% of its earnings. Assuming a constant share price, this equates to a dividend yield of 5.4%. However, EPS should increase to $0.60, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. Not only have dividend payouts from QBE Insurance Group fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Relative to peers, QBE Insurance Group generates a yield of 4.5%, which is high for Insurance stocks but still below the market's top dividend payers.
Next Steps:
If QBE Insurance Group is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that 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 pertinent factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for QBE’s future growth? Take a look at our free research report of analyst consensus for QBE’s outlook.
Valuation: What is QBE worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether QBE is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
