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Travelers Companies (NYSE:TRV) Is Increasing Its Dividend To US$0.88

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The Travelers Companies, Inc.'s (NYSE:TRV) dividend will be increasing to US$0.88 on 31st of December. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

Check out our latest analysis for Travelers Companies

Travelers Companies' Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Travelers Companies was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 12.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 29%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

historic-dividend
historic-dividend

Travelers Companies Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$1.44 in 2011, and the most recent fiscal year payment was US$3.52. This implies that the company grew its distributions at a yearly rate of about 9.3% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Travelers Companies Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Travelers Companies has seen EPS rising for the last five years, at 8.1% per annum. 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.

We Really Like Travelers Companies' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 13 Travelers Companies analysts we track are forecasting continued growth with our free report on analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.

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.

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

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