There’s A Lot To Like About Chubb’s (NYSE:CB) Upcoming US$0.86 Dividend

Readers hoping to buy Chubb Limited (NYSE:CB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company’s books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Chubb’s shares before the 14th of December in order to be eligible for the dividend, which will be paid on the 5th of January.

The company’s next dividend payment will be US$0.86 per share, on the back of last year when the company paid a total of US$3.44 to shareholders. Last year’s total dividend payments show that Chubb has a trailing yield of 1.5% on the current share price of $222.91. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Chubb

If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Chubb has a low and conservative payout ratio of just 20% of its income after tax.

Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.

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

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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. For this reason, we’re glad to see Chubb’s earnings per share have risen 16% per annum over the last five years.

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Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Chubb has lifted its dividend by approximately 5.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Chubb is keeping back more of its profits to grow the business.

To Sum It Up

Has Chubb got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. In summary, Chubb appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.

Ever wonder what the future holds for Chubb? See what the 15 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.

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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.