Ally Financial's (NYSE:ALLY) Dividend Will Be $0.30

The board of Ally Financial Inc. (NYSE:ALLY) has announced that it will pay a dividend on the 15th of February, with investors receiving $0.30 per share. Based on this payment, the dividend yield on the company's stock will be 3.7%, which is an attractive boost to shareholder returns.

See our latest analysis for Ally Financial

Ally Financial's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Ally Financial has established itself as a dividend paying company, given its 6-year history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 24% also shows that Ally Financial is able to comfortably pay dividends.

Looking forward, EPS is forecast to rise by 24.3% over the next 3 years. The future payout ratio could be 19% 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

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. The dividend has gone from an annual total of $0.32 in 2017 to the most recent total annual payment of $1.20. This means that it has been growing its distributions at 25% per annum 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.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Ally Financial has grown earnings per share at 21% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Ally Financial's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. To that end, Ally Financial has 3 warning signs (and 1 which is concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.