Readers hoping to buy Prosperity Bancshares, Inc. (NYSE:PB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 13th of September in order to be eligible for this dividend, which will be paid on the 1st of October.
Prosperity Bancshares's next dividend payment will be US$0.41 per share. Last year, in total, the company distributed US$1.64 to shareholders. Calculating the last year's worth of payments shows that Prosperity Bancshares has a trailing yield of 2.5% on the current share price of $65.56. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
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. Prosperity Bancshares paid out a comfortable 34% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Prosperity Bancshares, with earnings per share up 5.3% 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. Prosperity Bancshares has delivered 13% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Prosperity Bancshares for the upcoming dividend? Prosperity Bancshares 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 Prosperity Bancshares more closely.
Curious what other investors think of Prosperity Bancshares? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
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.
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If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.