Advertisement
Australia markets close in 2 hours 18 minutes
  • ALL ORDS

    7,982.20
    -20.30 (-0.25%)
     
  • ASX 200

    7,731.80
    -17.90 (-0.23%)
     
  • AUD/USD

    0.6630
    -0.0007 (-0.11%)
     
  • OIL

    78.20
    -0.42 (-0.53%)
     
  • GOLD

    2,320.30
    +2.30 (+0.10%)
     
  • Bitcoin AUD

    100,631.15
    -971.63 (-0.96%)
     
  • CMC Crypto 200

    1,419.43
    +6.48 (+0.46%)
     
  • AUD/EUR

    0.6172
    -0.0000 (-0.00%)
     
  • AUD/NZD

    1.0774
    +0.0021 (+0.20%)
     
  • NZX 50

    11,871.04
    -1.60 (-0.01%)
     
  • NASDAQ

    19,576.92
    +111.74 (+0.57%)
     
  • FTSE

    8,163.67
    -51.81 (-0.63%)
     
  • Dow Jones

    38,647.10
    -65.11 (-0.17%)
     
  • DAX

    18,265.68
    -365.18 (-1.96%)
     
  • Hang Seng

    17,996.82
    -115.81 (-0.64%)
     
  • NIKKEI 225

    38,879.41
    +158.94 (+0.41%)
     

There's A Lot To Like About Essent Group's (NYSE:ESNT) Upcoming US$0.25 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Essent Group Ltd. (NYSE:ESNT) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Essent Group's shares on or after the 9th of March, you won't be eligible to receive the dividend, when it is paid on the 20th of March.

The company's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Looking at the last 12 months of distributions, Essent Group has a trailing yield of approximately 2.3% on its current stock price of $43.71. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Essent Group can afford its dividend, and if the dividend could grow.

See our latest analysis for Essent Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Essent Group has a low and conservative payout ratio of just 11% of its income after tax.

ADVERTISEMENT

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Essent Group's earnings per share have been growing at 14% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last four years, Essent Group has lifted its dividend by approximately 14% 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

Should investors buy Essent Group for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Essent Group 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.

So while Essent Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 3 warning signs for Essent Group (1 is a bit concerning!) that deserve your attention before investing in the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here