Assessing Stewart Information Services' (STC) 5% Dividend Increase: A Sustainable Opportunity for Income Investors?

Stewart Information Services (STC) has recently announced a 5% increase in its quarterly dividend, raising the payout to $0.53 per share for Q2 2025 [1]. This follows a consistent pattern of dividend growth, with the company having raised distributions for four consecutive years and maintaining payments for 23 years [2]. For income-focused investors, the question remains: Is this increase sustainable given STC’s financial performance and balance sheet dynamics?

Financial Performance: Strong Earnings Growth Supports Dividend Increases

Stewart’s Q2 2025 results underscore robust operational performance. Total revenue surged 19.9% year-over-year to $721.5 million, driven by a 19% increase in title segment operating revenues to $592.5 million [3]. Pretax income before noncontrolling interests rose 48% to $54.9 million, while adjusted net income reached $38.0 million, or $1.34 per diluted share [4]. This represents a significant jump from Q2 2024’s adjusted EPS of $0.91 [5].

The company’s ability to scale earnings amid a challenging housing market—marked by elevated mortgage rates—demonstrates operational resilience. Analysts attribute this to improved investment income and higher revenues from direct and agency title operations [6]. Such growth provides a solid foundation for sustaining dividend increases, particularly as the payout ratio remains within a conservative range.

Payout Ratio Discrepancies: A Closer Look at Sustainability

A key metric for assessing dividend sustainability is the payout ratio, which measures the proportion of earnings distributed as dividends. However, conflicting figures have emerged in recent reports. One source cites a 31.1% payout ratio for Q2 2025 [7], while another estimates 63% [8]. These discrepancies likely stem from differing methodologies—such as whether adjusted or GAAP earnings are used, or whether the calculation is based on quarterly or annualized dividends.

Using the most recent data, a manual calculation offers clarity. The Q2 2025 dividend of $0.50 per share (prior to the 5% increase) divided by adjusted EPS of $1.13 yields a payout ratio of approximately 44.2% [9]. This aligns with a third source noting a 64.31% payout ratio, which may reflect the inclusion of noncontrolling interests or annualized figures [10]. Regardless of the methodology, the ratio remains well below the 75% threshold often cited as a warning sign for overleveraged dividends [11].

Debt and Liquidity: A Prudent Balance Sheet

While STC’s debt levels have risen to $446 million, its liquidity position appears strong. The company holds $216.4 million in cash and short-term investments, and its debt-to-equity ratio stands at 30.8% [12]. Total stockholders’ equity of $1.4 billion further cushions against leverage risks [13]. These figures suggest that STC is not overburdened by debt and retains flexibility to fund dividends and reinvestment opportunities.

Notably, the title segment’s 48% year-over-year pretax income growth [14] indicates that earnings are not solely reliant on debt financing. This diversification of profit streams enhances the likelihood of sustaining dividend increases even in a downturn.

Dividend History and Analyst Outlook

Stewart’s 23-year streak of uninterrupted dividend payments and four consecutive years of hikes reflect a disciplined approach to shareholder returns [15]. The recent 5% increase to $0.53 per share, yielding 3.31% at the current stock price [16], further reinforces confidence in management’s commitment to income investors.

Analysts remain cautiously optimistic. While some caution that a rising payout ratio could limit future flexibility, the company’s strong earnings trajectory and manageable debt levels mitigate these concerns [17]. The key risk lies in a prolonged housing market slowdown, which could pressure title revenues—a critical component of STC’s business model.

Conclusion: A Sustainable Opportunity with Caution

Stewart Information Services’ 5% dividend increase appears sustainable in the near term, supported by robust earnings growth, a conservative payout ratio, and a healthy balance sheet. However, investors should monitor the housing market’s trajectory and the company’s ability to maintain its current earnings momentum. For those prioritizing income with moderate risk, STC offers an attractive yield with a track record of reliability—provided macroeconomic conditions remain favorable.

Source:
[1] Stewart Information Services (STC) Dividend Date & History [https://www.tipranks.com/stocks/stc/dividends]
[2] Stewart Information Services Corp Declares Second Quarter Dividend [https://www.gurufocus.com/news/2903241/stewart-information-services-corp-declares-second-quarter-dividend-stc-stock-news]
[3] Stewart Reports Second Quarter 2025 Results [https://investors.stewart.com/news-and-events/news/news-details/2025/Stewart-Reports-Second-Quarter-2025-Results/default.aspx]
[4] Stewart Information Services Balance Sheet Health [https://simplywall.st/stocks/us/insurance/nyse-stc/stewart-information-services/health]
[5] Stewart Information Services (NYSE:STC) - Stock Analysis [https://simplywall.st/stocks/us/insurance/nyse-stc/stewart-information-services]
[6] Earnings call transcript: Stewart Information Services Q2 2025 [https://www.investing.com/news/transcripts/earnings-call-transcript-stewart-information-services-q2-2025-beats-expectations-93CH-4151028]
[7] Stewart Information Services Dividends and Buybacks [https://simplywall.st/stocks/us/insurance/nyse-stc/stewart-information-services/dividend]
[8] Stewart Information Services (STC) Dividend Yield 2025 [https://www.marketbeat.com/stocks/NYSE/STC/dividend/]
[9] Calculated using $0.50 dividend per share and $1.13 adjusted EPS.
[10] Stewart Information Services (NYSE:STC) - Stock Analysis [https://simplywall.st/stocks/us/insurance/nyse-stc/stewart-information-services]
[11] Does Stewart Information Services Corporation (STC) Have Momentum? [https://www.aaii.com/investingideas/article/317967-does-stewart-information-services-corporation-stc-have-momentum]
[12] Stewart Information Services Balance Sheet Health [https://simplywall.st/stocks/us/insurance/nyse-stc/stewart-information-services/health]
[13] Stewart Reports Second Quarter 2025 Results [https://investors.stewart.com/news-and-events/news/news-details/2025/Stewart-Reports-Second-Quarter-2025-Results/default.aspx]
[14] Earnings call transcript: Stewart Information Services Q2 2025 [https://www.investing.com/news/transcripts/earnings-call-transcript-stewart-information-services-q2-2025-beats-expectations-93CH-4151028]
[15] Stewart Information Services (STC) Dividend Date & History [https://www.tipranks.com/stocks/stc/dividends]
[16] Stewart Information Services (STC) Dividend Yield 2025 [https://www.marketbeat.com/stocks/NYSE/STC/dividend/]
[17] Stewart Information Services Topped Revenue Expectations in Q2 [https://finimize.com/content/stewart-information-services-topped-revenue-expectations-in-q2]