Amgen – Amgen Inc. (NASDAQ:AMGN) Will Pay A US$1.76 Dividend In Four Days
Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Amgen Inc. (NASDAQ:AMGN) is about to trade ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 11th of February will not receive this dividend, which will be paid on the 8th of March.
Amgen’s upcoming dividend is US$1.76 a share, following on from the last 12 months, when the company distributed a total of US$6.40 per share to shareholders. Last year’s total dividend payments show that Amgen has a trailing yield of 2.7% on the current share price of $236.32. 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! That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Amgen
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. Amgen paid out 52% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Amgen generated enough free cash flow to afford its dividend. It distributed 38% of its free cash flow as dividends, a comfortable payout level for most companies.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
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. With that in mind, we’re encouraged by the steady growth at Amgen, with earnings per share up 6.3% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we’d take this as a tacit signal that the company’s growth prospects are slowing.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Amgen has delivered 19% dividend growth per year on average over the past 10 years. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is Amgen an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest and Amgen paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. To summarise, Amgen looks okay on this analysis, although it doesn’t appear a stand-out opportunity.
While it’s tempting to invest in Amgen for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Amgen and you should be aware of this before buying any shares.
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.
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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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