Why You Might Be Interested In American Financial Group, Inc. (NYSE:AFG) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see American Financial Group, Inc. (NYSE:AFG) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase American Financial Group's shares on or after the 27th of September, you won't be eligible to receive the dividend, when it is paid on the 5th of October.
The upcoming dividend for American Financial Group will put a total of US$4.00 per share in shareholders' pockets, up from last year's total dividends of US$2.00. If you buy this business for its dividend, you should have an idea of whether American Financial Group's dividend is reliable and sustainable. As a result, readers should always check whether American Financial Group has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for American Financial Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. American Financial Group has a low and conservative payout ratio of just 13% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see American Financial Group's earnings have been skyrocketing, up 30% per annum 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. Since the start of our data, 10 years ago, American Financial Group has lifted its dividend by approximately 13% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is American Financial Group 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. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating American Financial Group more closely.
In light of that, while American Financial Group has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 4 warning signs for American Financial Group (of which 1 shouldn't be ignored!) you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top 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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