Where Next for the RSA Insurance Group plc (RSA) 7% Dividend?

RSA’s share price didn’t suffer as badly as its peer Aviva Plc (ADR) (NYSE:AV), however, thanks to a much lower level of exposure to the government debt of the eurozone’s troubled PIIGS nations. At the end of 2011, the last point for which figures were available, Aviva held 1.3 billion pounds of government debt issued by Portugal, Italy, Ireland, Greece and Spain, while RSA only held 138 million pounds of government debt from these countries, reducing its exposure to the worst risks in the eurozone.

Also unlike Aviva, RSA continued to increase its dividend throughout the financial crisis, resulting in a dividend yield that peaked at nearly 9% last year. Since then, RSA’s dividend yield has fallen to around 7% because of a 35% rise in the company’s share price.

Is RSA’s dividend safe?
RSA’s earnings per share hit a low of 9.7 pence in 2010, before rebounding to 11.8 pence per share in 2011. RSA hasn’t yet published its full-year results for 2012, but its half-year results suggest that this year’s earnings may be similar to last year’s, while the company’s cash balance has risen to 1,376 million pounds.

Overall, I think that RSA’s dividend looks pretty robust and is likely to continue to grow steadily over the next couple of years, making the company’s shares an attractive contender for an income portfolio.

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The article Where Next for the RSA Insurance Group 7% Dividend? originally appeared on Fool.com and is written by Roland Head.

Roland owns shares in Aviva but does not own shares in RSA Insurance Group.

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