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 Selective Insurance Group, Inc. (NASDAQ:SIGI) is about to go ex-dividend in just 3 days. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Selective Insurance Group's shares on or after the 15th of May, you won't be eligible to receive the dividend, when it is paid on the 2nd of June.

The company's upcoming dividend is US$0.38 a share, following on from the last 12 months, when the company distributed a total of US$1.52 per share to shareholders. Calculating the last year's worth of payments shows that Selective Insurance Group has a trailing yield of 1.7% on the current share price of US$89.73. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Selective Insurance Group paid out a comfortable 39% of its profit last year.

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.

Check out our latest analysis for Selective Insurance Group

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NasdaqGS:SIGI Historic Dividend May 11th 2025

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Selective Insurance Group's earnings per share have been shrinking at 4.1% a year over the previous five years.

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Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Selective Insurance Group has lifted its dividend by approximately 11% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Selective Insurance Group? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We're unconvinced on the company's merits, and think there might be better opportunities out there.

If you want to look further into Selective Insurance Group, it's worth knowing the risks this business faces. For example - Selective Insurance Group has 1 warning sign we think you should be aware of.

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.

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