Finding Value in Dividends
Investors saw a sweet spot in Ally Financial Inc (Symbol: ALLY) as its shares crossed the 3% yield mark during Friday’s trading session, thanks to its quarterly dividend hitting an annualized $1.20. Dividends have long been a juicy source of stock market returns. For instance, let’s rewind to May 31, 2000 — had you invested in the iShares Russell 3000 ETF (IWV), each share would have cost you $78.27. Fast forward to May 31, 2012, and the share price was $77.79, a mere 0.6% dip over twelve years. But here’s the zinger – you pocketed $10.77 per share in dividends during that time, turning your return into a staggering 13.15%. Even with dividends reinvested, that’s just an average yearly return of about 1.0%. So, a yield exceeding 3% seems like a scrumptious deal if sustainable. Being a part of the Russell 3000 gives Ally Financial Inc a VIP pass, ranking it among the top dogs on the U.S. stock market playground.
Forecasting the Future
Generally, dividend payouts bob and weave along with a company’s profitability tango. For Ally Financial Inc, taking a peek at its dividend history chart below could give vital clues on the likelihood of the current dividend safety and the potential for maintaining a 3% annual yield.
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The thoughts and musings laid out here belong to the author and don’t necessarily mirror those of Nasdaq, Inc.
