AGF Management (TSE:AGF.B) Has Announced A Dividend Of CA$0.115

AGF Management Limited (TSE:AGF.B) will pay a dividend of CA$0.115 on the 18th of July. Based on this payment, the dividend yield on the company's stock will be 5.4%, which is an attractive boost to shareholder returns.

See our latest analysis for AGF Management

AGF Management's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, AGF Management's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 3.6% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 31%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from CA$1.08 total annually to CA$0.46. Doing the maths, this is a decline of about 8.2% per year. 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

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. AGF Management has seen EPS rising for the last five years, at 18% per annum. AGF Management definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

AGF Management Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for AGF Management (1 is a bit concerning!) that you should be aware of before investing. Is AGF Management not quite the opportunity you were looking for? Why not check out our selection of top 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.

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