Stock Analysis

Amgen (NASDAQ:AMGN) Has Announced That It Will Be Increasing Its Dividend To $2.13

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Amgen Inc. (NASDAQ:AMGN) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of March to $2.13. This makes the dividend yield 3.5%, which is above the industry average.

View our latest analysis for Amgen

Amgen's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Amgen's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 18.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 61% by next year, which is in a pretty sustainable range.

NasdaqGS:AMGN Historic Dividend February 2nd 2023

Amgen Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $1.44 in 2013 to the most recent total annual payment of $8.52. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. 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. It's encouraging to see that Amgen has been growing its earnings per share at 35% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Amgen Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Amgen is a strong income stock thanks to its track record and growing earnings. 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. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Amgen that investors need to be conscious of moving forward. Is Amgen not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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