Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Federal Agricultural Mortgage Corporation (NYSE:AGM) is about to trade ex-dividend in the next four 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 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. In other words, investors can purchase Federal Agricultural Mortgage’s shares before the 14th of June in order to be eligible for the dividend, which will be paid on the 28th of June.
The company’s next dividend payment will be US$1.40 per share. Last year, in total, the company distributed US$5.60 to shareholders. Based on the last year’s worth of payments, Federal Agricultural Mortgage stock has a trailing yield of around 3.2% on the current share price of US$174.13. If you buy this business for its dividend, you should have an idea of whether Federal Agricultural Mortgage’s dividend is reliable and sustainable. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out 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 28% of profit.
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?
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 fall far enough, the company could be forced to cut its dividend. For this reason, we’re glad to see Federal Agricultural Mortgage’s earnings per share have risen 13% per annum over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Federal Agricultural Mortgage has delivered an average of 28% per year annual increase in its dividend, based on the past 10 years of dividend payments. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Has Federal Agricultural Mortgage got what it takes to maintain its dividend payments? 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. We think this is a pretty attractive combination, and would be interested in investigating Federal Agricultural Mortgage more closely.
So while Federal Agricultural Mortgage looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. For example – Federal Agricultural Mortgage has 1 warning sign we think you should be aware of.
If you’re in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Valuation is complex, but we’re helping make it simple.
Find out whether Federal Agricultural Mortgage is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
