- Oops!Something went wrong.Please try again later.
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see First Savings Financial Group, Inc. (NASDAQ:FSFG) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 16th of December will not receive this dividend, which will be paid on the 31st of December.
First Savings Financial Group's next dividend payment will be US$0.17 per share, on the back of last year when the company paid a total of US$0.68 to shareholders. Calculating the last year's worth of payments shows that First Savings Financial Group has a trailing yield of 1.1% on the current share price of $64.3. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are 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. First Savings Financial Group is paying out just 4.7% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. First Savings Financial Group paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
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. That's why it's comforting to see First Savings Financial Group's earnings have been skyrocketing, up 36% 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. In the past eight years, First Savings Financial Group has increased its dividend at approximately 6.9% a year on average. 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.
The Bottom Line
Is First Savings Financial Group an attractive dividend stock, or better left on the shelf? Companies like First Savings Financial Group that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. 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 First Savings Financial Group more closely.
While it's tempting to invest in First Savings Financial Group for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for First Savings Financial Group and you should be aware of it before buying any shares.
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.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.