Amalgamated Financial's (NASDAQ:AMAL) Upcoming Dividend Will Be Larger Than Last Year's

The board of Amalgamated Financial Corp. (NASDAQ:AMAL) has announced that it will be increasing its dividend by 25% on the 29th of August to $0.10, up from last year's comparable payment of $0.08. 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 Dividend Forecasted To Be Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

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. Based on its last earnings report however, the payout ratio is at a comfortable 7.7%, meaning that Amalgamated Financial may be able to sustain this dividend for future years if it continues on this earnings trend.

Looking forward, EPS is forecast to rise by 38.2% over the next 3 years. Analysts forecast the future payout ratio could be 14% over the same time horizon, which is a number we think the company can maintain.

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 means that it has been growing its distributions at 7.5% per annum 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Amalgamated Financial has seen EPS rising for the last five years, at 41% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Amalgamated Financial's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Amalgamated Financial for free with public analyst estimates for the company. Is Amalgamated Financial not quite the opportunity you were looking for? Why not check out 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.