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 of $0.30 per share on the 15th of November. This makes the dividend yield 4.9%, 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.

Having paid out dividends for 7 years, Ally Financial has a good history of paying out a part of its earnings to shareholders. Based on Ally Financial's last earnings report, the payout ratio is at a decent 33%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 54.2%. 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 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 annual payment during the last 7 years was $0.32 in 2016, and the most recent fiscal year payment was $1.20. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Ally Financial Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Ally Financial has grown earnings per share at 9.0% per year over the past five years. Ally Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Ally Financial's Dividend

Overall, we like to see the dividend staying consistent, and we think Ally Financial might even raise payments in the future. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Ally Financial that you should be aware of before investing. Is Ally 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.