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Should You Buy First Midwest Bancorp, Inc. (NASDAQ:FMBI) For Its Upcoming Dividend In 4 Days?

Simply Wall St

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see First Midwest Bancorp, Inc. (NASDAQ:FMBI) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 26th of March in order to be eligible for this dividend, which will be paid on the 7th of April.

First Midwest Bancorp's next dividend payment will be US$0.14 per share, and in the last 12 months, the company paid a total of US$0.56 per share. Calculating the last year's worth of payments shows that First Midwest Bancorp has a trailing yield of 4.3% on the current share price of $13.04. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for First Midwest Bancorp

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. First Midwest Bancorp paid out a comfortable 29% of its profit last year.

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

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

NasdaqGS:FMBI Historical Dividend Yield, March 21st 2020

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, First Midwest Bancorp's earnings per share have been growing at 15% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. First Midwest Bancorp has delivered 30% dividend growth per year on average over the past ten years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Has First Midwest Bancorp 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. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, First Midwest Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks First Midwest Bancorp is facing. To that end, you should learn about the 3 warning signs we've spotted with First Midwest Bancorp (including 1 which doesn't sit too well with us).

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.