Should You Buy Independent Bank Corporation (NASDAQ:IBCP) For Its Upcoming Dividend?
Readers hoping to buy Independent Bank Corporation (NASDAQ:IBCP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 4th of November in order to receive the dividend, which the company will pay on the 16th of November.
Independent Bank's upcoming dividend is US$0.20 a share, following on from the last 12 months, when the company distributed a total of US$0.80 per share to shareholders. Calculating the last year's worth of payments shows that Independent Bank has a trailing yield of 5.3% on the current share price of $14.96. If you buy this business for its dividend, you should have an idea of whether Independent Bank's dividend is reliable and sustainable. So we need to investigate whether Independent Bank can afford its dividend, and if the dividend could grow.
See our latest analysis for Independent Bank
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Independent Bank paid out a comfortable 32% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Independent Bank's earnings have been skyrocketing, up 25% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Independent Bank has delivered an average of 19% per year annual increase in its dividend, based on the past seven years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Independent Bank worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating Independent Bank more closely.
While it's tempting to invest in Independent Bank for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Independent Bank (including 1 which makes us a bit uncomfortable).
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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