Readers wishing to buy America’s leading financial company (NYSE: FAF) for its dividend will have to act shortly, as the stock is about to trade ex-dividend. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. This means that investors who buy First American Financial shares on or after September 7 will not receive the dividend, which will be paid on September 15.
The company’s next dividend payment will be US $ 0.51 per share, and over the past 12 months the company has paid a total of US $ 1.84 per share. Last year’s total dividend payouts show First American Financial to have a 3.0% return on the current price of $ 69.05. We love to see companies pay a dividend, but it’s also important to make sure that laying the golden eggs is not going to kill our goose that lays the golden eggs! It is therefore necessary to check whether dividend payments are covered and whether profits are growing.
Check out our latest analysis for First American Financial
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. First American Financial pays only 20% of its profits after tax, which is comfortably low and leaves a lot of leeway in the event of adverse events.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with consistently rising earnings per share usually make the best dividend-paying stocks because they generally find it easier to raise dividends per share. If profits fall enough, the company could be forced to cut its dividend. That’s why it’s heartwarming to see First American Financial’s profits soar, rising 27% annually over the past five years.
Most investors primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Since our data began 10 years ago, First American Financial has increased its dividend by around 24% per year on average. It is exciting to see that earnings and dividends per share have grown rapidly over the past few years.
From a dividend perspective, should investors buy or avoid First American Financial? Companies like First American Financial, which are growing rapidly and paying only a small fraction of their profits, typically reinvest heavily in their business. This is one of the most attractive investment combinations for this analysis as it can create substantial value for long-term investors. Overall, First American Financial appears to be a promising dividend-paying stock in this analysis, and we think it would be worth exploring further.
With this in mind, an essential part of in-depth stock research is being aware of the risks stocks currently face. To help you, we have discovered 1 warning sign for First American Financial which you should know before investing in their stocks.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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