Should You Buy German American Bancorp, Inc. (NASDAQ:GABC) For Its Upcoming Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see German American Bancorp, Inc. (NASDAQ:GABC) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase German American Bancorp's shares on or after the 9th of May, you won't be eligible to receive the dividend, when it is paid on the 20th of May.
The company's next dividend payment will be US$0.23 per share. Last year, in total, the company distributed US$0.92 to shareholders. Last year's total dividend payments show that German American Bancorp has a trailing yield of 2.6% on the current share price of $35.4. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for German American Bancorp
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately German American Bancorp's payout ratio is modest, at just 33% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at German American Bancorp, with earnings per share up 9.7% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, German American Bancorp has lifted its dividend by approximately 9.4% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is German American Bancorp an attractive dividend stock, or better left on the shelf? German American Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating German American Bancorp more closely.
While it's tempting to invest in German American Bancorp for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for German American Bancorp that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
