Here's What We Like About Federal Agricultural Mortgage's (NYSE:AGM) Upcoming Dividend
It looks like Federal Agricultural Mortgage Corporation (NYSE:AGM) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Federal Agricultural Mortgage's shares on or after the 14th of September will not receive the dividend, which will be paid on the 30th of September.
The company's next dividend payment will be US$0.88 per share, and in the last 12 months, the company paid a total of US$3.52 per share. Based on the last year's worth of payments, Federal Agricultural Mortgage has a trailing yield of 3.5% on the current stock price of $99.54. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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 from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Federal Agricultural Mortgage's payout ratio is modest, at just 36% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit Federal Agricultural Mortgage paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Federal Agricultural Mortgage's earnings per share have been growing at 17% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Federal Agricultural Mortgage has delivered 33% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Is Federal Agricultural Mortgage an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Federal Agricultural Mortgage appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Federal Agricultural Mortgage has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Federal Agricultural Mortgage you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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