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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 the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Federal Agricultural Mortgage's shares on or after the 14th of March will not receive the dividend, which will be paid on the 31st of March.
The company's next dividend payment will be US$1.50 per share. Last year, in total, the company distributed US$6.00 to shareholders. Looking at the last 12 months of distributions, Federal Agricultural Mortgage has a trailing yield of approximately 3.0% on its current stock price of US$200.77. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Federal Agricultural Mortgage
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. Fortunately Federal Agricultural Mortgage's payout ratio is modest, at just 34% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 14% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Federal Agricultural Mortgage has delivered an average of 27% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.