The board of Amalgamated Financial Corp. (NASDAQ:AMAL) has announced that the dividend on 29th of August will be increased to $0.10, which will be 25% higher than last year's payment of $0.08 which covered the same period. Although the dividend is now higher, the yield is only 1.4%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Amalgamated Financial's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Amalgamated Financial

Amalgamated Financial's Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Amalgamated Financial is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. While it has a shorter history of paying out dividends, Amalgamated Financial's payout ratio of 7.7% is a great sign for current shareholders, as this means that earnings greatly cover dividends.

Over the next 3 years, EPS is forecast to expand by 38.2%. The future payout ratio could be 14% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Amalgamated Financial Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The annual payment during the last 4 years was $0.24 in 2018, and the most recent fiscal year payment was $0.32. This works out to be a compound annual growth rate (CAGR) of approximately 7.5% a year over that time. Amalgamated Financial has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Amalgamated Financial has been growing its earnings per share at 41% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Amalgamated Financial Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.