Ally Financial (NYSE:ALLY) Has Announced A Dividend Of $0.30

Ally Financial Inc.'s (NYSE:ALLY) investors are due to receive a payment of $0.30 per share on 15th of August. Based on this payment, the dividend yield on the company's stock will be 2.8%, which is an attractive boost to shareholder returns.

View our latest analysis for Ally Financial

Ally Financial's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Ally Financial has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 51%shows that Ally Financial would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 175.6% over the next 3 years. The future payout ratio could be 21% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Ally Financial Is Still Building Its Track Record

Ally Financial's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.32 in 2016 to the most recent total annual payment of $1.20. This means that it has been growing its distributions at 18% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. In the last five years, Ally Financial's earnings per share has shrunk at approximately 9.9% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Ally Financial's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Ally Financial is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Ally Financial that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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