Ally Financial's Dividend Yield at 3.1%: A Mixed Bag

Ally Financial (NYSE:ALLY) will pay a dividend of $0.30 per share on August 15th, resulting in a dividend yield of 3.1%. The company's earnings per share are expected to rise significantly over the next three years, with a forecasted payout ratio of 24%. However, Ally Financial's short dividend history and recent decline in EPS raise concerns about the sustainability of the current dividend rate.

Ally Financial (NYSE:ALLY) has announced a quarterly dividend payment of $0.30 per share, payable on August 15, 2025, to shareholders on record by August 1, 2025 [1]. This dividend, which represents a 3.1% yield based on current share prices, underscores the company's commitment to returning value to shareholders.

In addition to the common stock dividend, Ally Financial has also declared dividends for its Series B and Series C preferred stocks. The Series B preferred stock will see a total payment of approximately $15.9 million, translating to $11.75 per share, while the Series C preferred stock will yield a total of approximately $11.8 million, also at $11.75 per share. Both preferred dividends will be payable on August 15, 2025, for those recorded by July 31, 2025 [1].

The company's recent strong financial performance has been noted by analysts. JPMorgan has raised its price target on Ally Financial stock to $45.00 from $44.00, maintaining an Overweight rating following the company’s second-quarter earnings report [2]. The stock currently trades at $39.88, appearing fairly valued according to InvestingPro analysis.

Ally Financial reported adjusted earnings per share of $0.99 for the second quarter of 2025, exceeding JPMorgan’s estimate of $0.82 and the consensus forecast of $0.81 [2]. The company’s revenue also exceeded forecasts, reaching $2.1 billion, highlighting a robust operational performance. Despite these positive results, BofA Securities lowered its price target for Ally Financial from $44 to $43, maintaining a Buy rating. The adjustment followed concerns about the bank’s near-term asset sensitivity, despite improved credit trends and a positive earnings outcome [2].

While the dividend is a positive sign for income-focused investors, concerns have been raised about the sustainability of the current dividend rate. The company's short dividend history and recent decline in EPS raise questions about the long-term viability of the dividend [3]. However, analysts project the payout ratio to drop to 24.2% by 2028 as earnings grow, suggesting the dividend is far from unsustainable in the long run [3].

Institutional investors hold 88.76% of Ally's stock, with notable buyers stepping up in recent quarters. The company's core auto lending business and digital banking platform are seen as key drivers of growth, positioning Ally Financial for continued expansion [3].

References:
[1] https://www.gurufocus.com/news/2982533/ally-financial-declares-dividend-on-common-stock-and-series-b-and-series-c-preferred-stock-ally-stock-news
[2] https://www.investing.com/news/analyst-ratings/jpmorgan-raises-ally-financial-stock-price-target-to-45-on-strong-q2-results-93CH-4143373
[3] https://www.ainvest.com/news/ally-financial-s-dividend-strategy-a-steady-income-play-with-hidden-upside-2507101028b3537236c41be8/