Attention dividend hunters! Shore Bancshares Inc (NASDAQ:SHBI) will be distributing its dividend of US$0.09 per share on the 30 November 2018, and will start trading ex-dividend in 4 days time on the 15 November 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Shore Bancshares’s latest financial data to analyse its dividend characteristics.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does Shore Bancshares fit our criteria?
Shore Bancshares has a trailing twelve-month payout ratio of 24%, which means that the dividend is covered by earnings. Going forward, analysts expect SHBI’s payout to increase to 28% of its earnings, which leads to a dividend yield of 2.3%. Moreover, EPS should increase to $1.49. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality facing SHBI investors is that whilst it has continued to pay shareholders dividend, there has not been any increase in the level of dividends paid in the past decade. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
Compared to its peers, Shore Bancshares generates a yield of 2.2%, which is on the low-side for Banks stocks.
Taking into account the dividend metrics, Shore Bancshares ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three pertinent factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SHBI’s future growth? Take a look at our free research report of analyst consensus for SHBI’s outlook.
- Valuation: What is SHBI worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SHBI is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.