It looks like E*TRADE Financial Corporation (NASDAQ:ETFC) is about to go ex-dividend in the next 4 days. You can purchase shares before the 16th of August in order to receive the dividend, which the company will pay on the 26th of August.
E*TRADE Financial's next dividend payment will be US$0.14 per share. Last year, in total, the company distributed US$0.56 to shareholders. Based on the last year's worth of payments, E*TRADE Financial stock has a trailing yield of around 1.3% on the current share price of $42.22. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. E*TRADE Financial has a low and conservative payout ratio of just 10% of its income after tax.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see E*TRADE Financial has grown its earnings rapidly, up 69% a year for the past five years.
Given that E*TRADE Financial has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Is E*TRADE Financial worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating E*TRADE Financial more closely.
Curious what other investors think of E*TRADE Financial? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
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.