Regions Financial Corporation (NYSE:RF) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 5th of September in order to receive the dividend, which the company will pay on the 1st of October.
Regions Financial's upcoming dividend is US$0.15 a share, following on from the last 12 months, when the company distributed a total of US$0.62 per share to shareholders. Calculating the last year's worth of payments shows that Regions Financial has a trailing yield of 4.2% on the current share price of $14.62. If you buy this business for its dividend, you should have an idea of whether Regions Financial's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Regions Financial paid out a comfortable 39% 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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Regions Financial's earnings per share have risen 13% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Regions Financial has delivered 4.5% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Regions Financial is keeping back more of its profits to grow the business.
To Sum It Up
From a dividend perspective, should investors buy or avoid Regions Financial? 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 strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Regions Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for Regions Financial? See what the 19 analysts we track 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 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.