American International Group's (NYSE:AIG) Upcoming Dividend Will Be Larger Than Last Year's

American International Group, Inc. (NYSE:AIG) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of June to $0.36. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

View our latest analysis for American International Group

American International Group's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, American International Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 1.6%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 17%, which we are pretty comfortable with and we think is feasible on an earnings basis.

American International Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $0.40 total annually to $1.44. This means that it has been growing its distributions at 14% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that American International Group has grown earnings per share at 58% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like American International Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for American International Group (1 is significant!) 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.