The board of Amalgamated Financial Corp. (NASDAQ:AMAL) has announced that it will pay a dividend on the 23rd of February, with investors receiving $0.10 per share. Including this payment, the dividend yield on the stock will be 1.5%, which is a modest boost for shareholders' returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Amalgamated Financial's stock price has increased by 50% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Amalgamated Financial

Amalgamated Financial's Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Amalgamated Financial has established itself as a dividend paying company, given its 5-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Amalgamated Financial's latest earnings report puts its payout ratio at 14%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to expand by 21.0%. Analysts forecast the future payout ratio could be 12% over the same time horizon, which is a number we think the company can maintain.

Amalgamated Financial Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of $0.24 in 2019 to the most recent total annual payment of $0.40. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Amalgamated Financial has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Amalgamated Financial has seen EPS rising for the last five years, at 14% per annum. Amalgamated Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Amalgamated Financial 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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.