Why You Might Be Interested In AGF Management Limited (TSE:AGF.B) For Its Upcoming Dividend

AGF Management Limited (TSE:AGF.B) is about to trade ex-dividend in the next two 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase AGF Management's shares on or after the 10th of April will not receive the dividend, which will be paid on the 24th of April.

The company's next dividend payment will be CA$0.11 per share. Last year, in total, the company distributed CA$0.44 to shareholders. Looking at the last 12 months of distributions, AGF Management has a trailing yield of approximately 5.2% on its current stock price of CA$8.44. If you buy this business for its dividend, you should have an idea of whether AGF Management's dividend is reliable and sustainable. As a result, readers should always check whether AGF Management has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for AGF Management

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. Fortunately AGF Management's payout ratio is modest, at just 28% 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see AGF Management's earnings per share have risen 11% 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. AGF Management has seen its dividend decline 8.6% per annum on average over the past 10 years, which is not great to see. AGF Management is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Has AGF Management got what it takes to maintain its dividend payments? 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, AGF Management appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 2 warning signs for AGF Management (of which 1 doesn't sit too well with us!) you should know about.

If you're in the market for strong dividend payers, we recommend checking 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.