Federal Agricultural Mortgage Corporation(NYSE:AGM) is about to trade ex-dividend in the next 4 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Federal Agricultural Mortgage's shares on or after the 14th of June, you won't be eligible to receive the dividend, when it is paid on the 30th of June.
The company's next dividend payment will be US$0.95 per share. Last year, in total, the company distributed US$3.80 to shareholders. Calculating the last year's worth of payments shows that Federal Agricultural Mortgage has a trailing yield of 3.7% on the current share price of $101.92. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Check out 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. That's why it's good to see Federal Agricultural Mortgage paying out a modest 32% of its earnings.
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.NYSE:AGM Historic Dividend June 9th 2022Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. 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. In the past 10 years, Federal Agricultural Mortgage has increased its dividend at approximately 34% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.The Bottom Line
Is Federal Agricultural Mortgage worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Federal Agricultural Mortgage more closely.
While it's tempting to invest in Federal Agricultural Mortgage for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks,we've identified 1 warning signwith Federal Agricultural Mortgage and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommendchecking our selection of top dividend stocks.
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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.