Ally Financial (NYSE:ALLY) Is Paying Out 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. This makes the dividend yield 4.1%, which will augment investor returns quite nicely.

Check out our latest analysis for Ally Financial

Ally Financial's Earnings Will Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Ally Financial has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Ally Financial's payout ratio of 33% is a good sign for current shareholders as this means that earnings decently cover dividends.

The next 3 years are set to see EPS grow by 54.5%. The future payout ratio could be 24% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Ally Financial Doesn't Have A Long Payment History

It is great to see that Ally Financial has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the annual payment back then was $0.32, compared to the most recent full-year payment of $1.20. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Ally Financial Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Ally Financial has seen EPS rising for the last five years, at 9.0% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Ally Financial Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Ally Financial that investors should know about before committing capital to this stock. 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.