Chubb Limited (NYSE:CB) has announced that it will be increasing its periodic dividend on the 3rd of July to $0.97, which will be 6.6% higher than last year's comparable payment amount of $0.91. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.

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Chubb's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Chubb 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.

Over the next year, EPS is forecast to expand by 35.1%. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.NYSE:CB Historic Dividend May 19th 2025

View our latest analysis for Chubb

Chubb Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was $2.60, compared to the most recent full-year payment of $3.64. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Chubb has seen EPS rising for the last five years, at 21% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Chubb Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Chubb is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Chubb that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of 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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