Is It Smart To Buy W. R. Berkley Corporation (NYSE:WRB) Before It Goes Ex-Dividend?

W. R. Berkley Corporation (NYSE:WRB) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase W. R. Berkley's shares before the 23rd of February in order to be eligible for the dividend, which will be paid on the 4th of March.

The company's next dividend payment will be US$0.09 per share, and in the last 12 months, the company paid a total of US$1.86 per share. Based on the last year's worth of payments, W. R. Berkley stock has a trailing yield of around 2.6% on the current share price of US$70.80. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether W. R. Berkley can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. W. R. Berkley has a low and conservative payout ratio of just 7.8% of its income after tax.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

See our latest analysis for W. R. Berkley

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see W. R. Berkley has grown its earnings rapidly, up 30% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, W. R. Berkley has lifted its dividend by approximately 29% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is W. R. Berkley an attractive dividend stock, or better left on the shelf? Companies like W. R. Berkley that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. W. R. Berkley ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with W. R. Berkley and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.