Is American Financial Group Inc (NYSE:AFG) A Smart Choice For Dividend Investors?
There is a lot to be liked about American Financial Group Inc (NYSE:AFG) as an income stock, over the past 10 years it has returned an average of 2.00% per year. The company currently pays out a dividend yield of 2.64% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at American Financial Group in more detail. See our latest analysis for American Financial Group
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has dividend per share amount increased over the past?
Is it able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
How does American Financial Group fare?
The company currently pays out 25.01% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 15.80%, leading to a dividend yield of 1.20%. However, EPS should increase to $7.91, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. AFG has increased its DPS from $0.5 to $2.9 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. In terms of its peers, American Financial Group has a yield of 2.64%, which is on the low-side for Insurance stocks.
Next Steps:
Keeping in mind the dividend characteristics above, American Financial Group is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three pertinent aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for AFG’s future growth? Take a look at our free research report of analyst consensus for AFG’s outlook.
Valuation: What is AFG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AFG is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
