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AGF Management Limited (TSE:AGF.B) will increase its dividend from last year's comparable payment on the 23rd of April to CA$0.125. This makes the dividend yield 5.4%, which is above the industry average.
AGF Management's Future Dividend Projections Appear Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, AGF Management's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
EPS is set to fall by 26.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 40%, which we are pretty comfortable with and we think is feasible on an earnings basis.
See our latest analysis for AGF Management
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from CA$1.08 total annually to CA$0.50. This works out to be a decline of approximately 7.4% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. We are encouraged to see that AGF Management has grown earnings per share at 15% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like AGF Management's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for AGF Management (1 shouldn't be ignored!) that you should be aware of before investing. 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.