There's A Lot To Like About Federal Agricultural Mortgage's (NYSE:AGM) Upcoming US$1.50 Dividend

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 Federal Agricultural Mortgage Corporation (NYSE:AGM) is about to go ex-dividend in just four days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. This means that investors who purchase Federal Agricultural Mortgage's shares on or after the 15th of December will not receive the dividend, which will be paid on the 31st of December.

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 3.3% on its current stock price of US$180.84. If you buy this business for its dividend, you should have an idea of whether Federal Agricultural Mortgage's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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. Federal Agricultural Mortgage paid out a comfortable 33% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

View our latest analysis for Federal Agricultural Mortgage

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Federal Agricultural Mortgage's earnings per share have been growing at 15% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Federal Agricultural Mortgage has lifted its dividend by approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Federal Agricultural Mortgage? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Federal Agricultural Mortgage looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Federal Agricultural Mortgage for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Federal Agricultural Mortgage that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.