The board of Universal Insurance Holdings, Inc. (NYSE:UVE) has announced that it will pay a dividend on the 16th of May, with investors receiving $0.16 per share. Based on this payment, the dividend yield on the company's stock will be 3.3%, which is an attractive boost to shareholder returns.

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Universal Insurance Holdings' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Universal Insurance Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 15.5% over the next year. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Universal Insurance Holdings

Universal Insurance Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.57 in 2015 to the most recent total annual payment of $0.77. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Universal Insurance Holdings Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Universal Insurance Holdings has grown earnings per share at 8.9% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Universal Insurance Holdings Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Universal Insurance Holdings that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.