The board of The Travelers Companies, Inc. (NYSE:TRV) has announced that it will be paying its dividend of $1.05 on the 28th of June, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.0%.

Check out our latest analysis for Travelers Companies

Travelers Companies' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Travelers Companies' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 68.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range. historic-dividend

Travelers Companies Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $2.00 in 2014, and the most recent fiscal year payment was $4.20. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

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 6.5% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Travelers Companies Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Travelers Companies that investors should know about before committing capital to this stock. Is Travelers Companies not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.