Cigna (NYSE:CI) Will Pay A Larger Dividend Than Last Year At $1.23

Cigna Corporation (NYSE:CI) will increase its dividend on the 23rd of March to $1.23, which is 9.8% higher than last year's payment from the same period of $1.12. The payment will take the dividend yield to 1.5%, which is in line with the average for the industry.

Check out our latest analysis for Cigna

Cigna's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Cigna's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 16.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Cigna Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was $0.04, compared to the most recent full-year payment of $4.48. This works out to be a compound annual growth rate (CAGR) of approximately 60% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Cigna has impressed us by growing EPS at 18% 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.

We Really Like Cigna's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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 of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Cigna that you should be aware of before investing. 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.

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