There's A Lot To Like About American Financial Group's (NYSE:AFG) Upcoming US$3.50 Dividend
It looks like American Financial Group, Inc. (NYSE:AFG) is about to go 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase American Financial Group's shares before the 16th of November in order to receive the dividend, which the company will pay on the 25th of November.
The company's upcoming dividend is US$3.50 a share, following on from the last 12 months, when the company distributed a total of US$3.88 per share to shareholders. Based on the last year's worth of payments, American Financial Group has a trailing yield of 2.4% on the current stock price of US$160.84. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
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 American Financial Group's payout ratio is modest, at just 29% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
See our latest analysis for American Financial Group
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 27% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. American Financial Group has delivered 6.2% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is American Financial Group an attractive dividend stock, or better left on the shelf? Companies like American Financial Group that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, American Financial Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in American Financial Group for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for American Financial Group that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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