Warren Buffet has built an empire around insurance businesses. It’s a cash flow rich industry and most insurance companies pay dividends. That’s why I’m reviewing Chubb stock today…
Chubb is a $59 billion insurance business that operates out of Zurich. The company employs 31,000 people and generated $1 million in sales per employee. Last year, Chubb pulled in $32 billion in total sales.
Chubb 10-Year Dividend per Share History
Chubb paid investors $1.09 per share a decade ago. Over the last 10 years, the dividend has climbed to $2.82. That’s a 159% increase and you can see the annual changes below…
The compound annual growth is 10% over 10 years… but over the last year, the dividend climbed 2.9%. The slowdown in dividend growth isn’t a great sign. Although, Chubb still might be a good income investment. Let’s review the yield…
Chubb Current Dividend Yield vs. 10-Year Average
Chubb’s long history of paying dividends makes it one of the best dividend stocks around. This also makes the dividend yield a great indicator of value. A higher yield is generally better for buyers. Sustainability is also vital, and we’ll look at that soon.
Chubb’s dividend yield comes in at 2.27% and that’s below the 10-year average of 2.61%. The chart below shows the dividend yield over the last 10 years…
The lower yield shows that investors have bid up the company’s market value. They might be expecting higher growth and payouts. Although, the yield has started climbing back towards its average over the last year.
Improved Chubb Stock Dividend Safety Check
Dividend investors often look at the payout ratio to determine dividend safety. They look at the dividend per share divided by the net income per share. So a payout ratio of 65% would mean that for every $1 Chubb earns, it pays investors $0.65.
The dividend payout ratio is useful for determining dividend safety but accountants manipulate net income. They adjust for non-cash items such as goodwill. Instead, a better metric is free cash flow.
Here’s Chubb payout ratio based on free cash flow over the last 10 years…
The ratio is volatile over the last 10 years and the trend is up. Although, the last reported year shows a payout ratio of 29.3%. This gives plenty of room for Chubb’s board of directors to keep raising the dividend.
The Chubb dividend is safe although, the yield is below the 10-year treasury yield. You might want to shop for better dividend stocks in the current market.
If you’re interested in seeing more dividend research, please comment below. You can also check out our free dividend DRIP calculator.
Good investing,
Robert
