Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Amalgamated Bank (NASDAQ:AMAL) is about to go ex-dividend in just 4 days. This means that investors who purchase shares on or after the 20th of February will not receive the dividend, which will be paid on the 6th of March.
Amalgamated Bank’s next dividend payment will be US$0.08 per share, on the back of last year when the company paid a total of US$0.24 to shareholders. Last year’s total dividend payments show that Amalgamated Bank has a trailing yield of 1.3% on the current share price of $18.14. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Amalgamated Bank paid out just 8.1% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It’s encouraging to see Amalgamated Bank has grown its earnings rapidly, up 32% a year for the past three years.
Given that Amalgamated Bank has only been paying a dividend for a year, there’s not much of a past history to draw insight from.
The Bottom Line
From a dividend perspective, should investors buy or avoid Amalgamated Bank? 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. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Amalgamated Bank appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
Wondering what the future holds for Amalgamated Bank? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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