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Federal Agricultural Mortgage Corporation (NYSE:AGM) Looks Interesting, And It's About To Pay A Dividend

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·3 min read
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It looks like Federal Agricultural Mortgage Corporation (NYSE:AGM) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Federal Agricultural Mortgage's shares before the 14th of December in order to be eligible for the dividend, which will be paid on the 31st of December.

The company's upcoming dividend is US$0.88 a share, following on from the last 12 months, when the company distributed a total of US$3.52 per share to shareholders. Based on the last year's worth of payments, Federal Agricultural Mortgage has a trailing yield of 2.8% on the current stock price of $124.8. If you buy this business for its dividend, you should have an idea of whether Federal Agricultural Mortgage's dividend is reliable and sustainable. So we need to investigate whether Federal Agricultural Mortgage can afford its dividend, and if the dividend could grow.

View our latest analysis for Federal Agricultural Mortgage

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Federal Agricultural Mortgage paid out a comfortable 35% of its profit last year.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Federal Agricultural Mortgage paid out over the last 12 months.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Federal Agricultural Mortgage's earnings per share have been growing at 18% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Federal Agricultural Mortgage has increased its dividend at approximately 33% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Federal Agricultural Mortgage worth buying for its dividend? Companies like Federal Agricultural Mortgage that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Federal Agricultural Mortgage appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Keen to explore more data on Federal Agricultural Mortgage's financial performance? Check out our visualisation of its historical revenue and earnings growth.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.