Franklin Financial Services (NASDAQ:FRAF) Could Be A Buy For Its Upcoming Dividend
Franklin Financial Services Corporation (NASDAQ:FRAF) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Franklin Financial Services investors that purchase the stock on or after the 3rd of August will not receive the dividend, which will be paid on the 23rd of August.
The company's next dividend payment will be US$0.32 per share. Last year, in total, the company distributed US$1.28 to shareholders. Last year's total dividend payments show that Franklin Financial Services has a trailing yield of 4.3% on the current share price of $29.565. 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! As a result, readers should always check whether Franklin Financial Services has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Franklin Financial Services
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. Fortunately Franklin Financial Services's payout ratio is modest, at just 39% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see how much of its profit Franklin Financial Services paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Franklin Financial Services's earnings have been skyrocketing, up 46% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Franklin Financial Services has lifted its dividend by approximately 6.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid Franklin Financial Services? Companies like Franklin Financial Services 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. In summary, Franklin Financial Services appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Want to learn more about Franklin Financial Services? Here's a visualisation of its historical rate of revenue and earnings growth.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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