Amalgamated Financial Corp. (NASDAQ:AMAL) has announced that it will pay a dividend of $0.10 per share on the 22nd of August. This payment means the dividend yield will be 2.0%, which is below the average for the industry.
Amalgamated Financial's Payment Expected To Have Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive.
Having paid out dividends for 5 years, Amalgamated Financial has a good history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Amalgamated Financial's latest earnings report puts its payout ratio at 14%, showing that the company can pay out its dividends comfortably.
Looking forward, earnings per share is forecast to fall by 2.3% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 19% over the same time period, which is in a pretty comfortable range.
Amalgamated Financial Doesn't Have A Long Payment History
Amalgamated Financial's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2018, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.40. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Amalgamated Financial has grown earnings per share at 33% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Amalgamated Financial Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Amalgamated Financial (1 can't be ignored!) 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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