Enstar Group's 8.5% Dividend Yield: A Steady Bet in a Volatile Market?

The financial markets have been a rollercoaster in recent months, but one corner of the investing world remains stubbornly consistent: Enstar Group Limited’s DEP SHS PFD D (ESGRP). On March 3, 2025, the insurer declared its latest dividend of $0.438 per share—a payout that has been unchanging for over five years. With a current yield of 8.47%, this preference share has emerged as a rare bright spot for income-focused investors. But is this high yield sustainable, or are there hidden risks lurking beneath the surface?

The Dividend Machine

Enstar’s DEP SHS PFD D has delivered quarterly dividends of $0.438 per share since at least 2020, a streak of consistency that’s rare in today’s volatile markets. The latest payment, made in March, marked the 21st consecutive quarter of uninterrupted payouts. This reliability is underscored by a payout ratio of just 7.23%—meaning Enstar is distributing a mere fraction of its earnings to shareholders. Such a low payout ratio suggests the company could weather moderate earnings declines without jeopardizing dividends, a stark contrast to many high-yield peers that operate on razor-thin margins.

The current share price of $20.66 (as of May 5, 2025) implies a trailing-12-month yield of 8.47%, well above the 8.14% average of the top 25% of dividend payers in the U.S. Financial Services sector. This premium isn’t accidental: Enstar’s preference shares are structured to prioritize returns to investors, even if the dividends are non-cumulative. That means if Enstar skips a payment—unlikely, given its history—investors won’t get make-up payments, unlike holders of cumulative preferred shares.

The Case for Caution

While the dividend’s stability is impressive, the lack of growth raises eyebrows. Over five years, the payout has declined by a minuscule 0.0228%, effectively flatlining. For investors seeking capital appreciation or dividend growth, this could be a red flag. Meanwhile, the stock price has dipped 2.78% year-to-date, reflecting broader market skepticism about the insurance sector’s ability to sustain profitability amid economic uncertainty.

Moreover, the non-cumulative feature of these preference shares introduces risk. Unlike cumulative preferred stocks, which accrue missed dividends, Enstar’s shareholders face the possibility of abrupt cuts if the company’s earnings falter. This distinction is critical: in a stress scenario, such as a sudden spike in insurance claims or a downturn in Enstar’s reinsurance business, management could halt dividends without penalty.

The Bottom Line

Enstar’s DEP SHS PFD D is a compelling option for investors prioritizing income over growth. The 8.47% yield is a standout in a low-interest-rate environment, and the minuscule payout ratio suggests a strong safety margin. However, the lack of dividend growth and the non-cumulative structure mean this is not a “set it and forget it” investment.

To justify holding this position, investors must believe Enstar’s core business—managing and underwriting insurance risks—will remain resilient. The company’s focus on niche markets, such as run-off insurance and reinsurance, has historically insulated it from broad market swings. Yet, with the stock price down 2.78% YTD and minimal dividend growth, the trade-off between yield and stagnation is a key consideration.

In the end, Enstar’s preference shares offer a high-yield, low-growth option for income investors willing to tolerate structural risks. For the right portfolio, this could be a valuable anchor—but only if the dividend’s consistency continues to outweigh its static nature.