Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that First Savings Financial Group, Inc. (NASDAQ:FSFG) is about to go ex-dividend in just 4 days. This means that investors who purchase shares on or after the 12th of September will not receive the dividend, which will be paid on the 30th of September.
First Savings Financial Group's next dividend payment will be US$0.16 per share, and in the last 12 months, the company paid a total of US$0.64 per share. Calculating the last year's worth of payments shows that First Savings Financial Group has a trailing yield of 1.1% on the current share price of $59.296. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether First Savings Financial Group has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. First Savings Financial Group paid out just 9.9% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. First Savings Financial Group paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see First Savings Financial Group has grown its earnings rapidly, up 25% 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 Savings Financial Group has delivered an average of 6.9% per year annual increase in its dividend, based on the past 7 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid First Savings Financial Group? Companies like First Savings Financial Group that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. First Savings Financial Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Want to learn more about First Savings Financial Group's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.