Is It Smart To Buy First American Financial Corporation (NYSE:FAF) Before It Goes Ex-Dividend?

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends….

NYSE:FAF) is about to go ex-dividend in just four days. You can purchase shares before the 4th of September in order to receive the dividend, which the company will pay on the 15th of September.” data-reactid=”28″>Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that First American Financial Corporation (NYSE:FAF) is about to go ex-dividend in just four days. You can purchase shares before the 4th of September in order to receive the dividend, which the company will pay on the 15th of September.

First American Financial’s next dividend payment will be US$0.44 per share, on the back of last year when the company paid a total of US$1.76 to shareholders. Calculating the last year’s worth of payments shows that First American Financial has a trailing yield of 3.3% on the current share price of $53.21. If you buy this business for its dividend, you should have an idea of whether First American Financial’s dividend is reliable and sustainable. As a result, readers should always check whether First American Financial has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for First American Financial ” data-reactid=”30″> Check out 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 30% of its profit last year.

Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.

here to see the company’s payout ratio, plus analyst estimates of its future dividends.” data-reactid=”37″>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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That’s why it’s comforting to see First American Financial’s earnings have been skyrocketing, up 21% per annum for the past five years.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, First American Financial has lifted its dividend by approximately 22% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has First American Financial got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating First American Financial more closely.

1 warning sign for First American Financial you should be aware of.” data-reactid=”55″>In light of that, while First American Financial has an appealing dividend, it’s worth knowing the risks involved with this stock. Case in point: We’ve spotted 1 warning sign for First American Financial you should be aware of.

checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.” data-reactid=”56″>If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

Get in touch with us directly. Alternatively, email [email protected].” data-reactid=”57″>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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

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