First American Financial Corporation (NYSE:FAF) Passed Our Checks, And It's About To Pay A US$0.46 Dividend
Readers hoping to buy First American Financial Corporation (NYSE:FAF) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 5th of March to receive the dividend, which will be paid on the 15th of March.
First American Financial's next dividend payment will be US$0.46 per share, and in the last 12 months, the company paid a total of US$1.84 per share. Calculating the last year's worth of payments shows that First American Financial has a trailing yield of 3.5% on the current share price of $52.54. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether First American Financial can afford its dividend, and if the dividend could grow.
View our latest analysis for First American Financial
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. First American Financial paid out a comfortable 29% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, First American Financial's earnings per share have been growing at 18% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, First American Financial has increased its dividend at approximately 23% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Has First American Financial got what it takes to maintain its dividend payments? Companies like First American Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, First American Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in First American Financial for the dividends alone, you should always be mindful of the risks involved. For example - First American Financial has 1 warning sign we think you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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