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FS Bancorp, Inc. (NASDAQ:FSBW) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 7th of August will not receive this dividend, which will be paid on the 22nd of August.
FS Bancorp's next dividend payment will be US$0.15 per share. Last year, in total, the company distributed US$0.60 to shareholders. Last year's total dividend payments show that FS Bancorp has a trailing yield of 1.2% on the current share price of $48.35. 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! We need to see whether the dividend is covered by earnings and if it's 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. FS Bancorp has a low and conservative payout ratio of just 9.4% of its income after tax.
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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see FS Bancorp's earnings have been skyrocketing, up 37% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. FS Bancorp has delivered an average of 20% per year annual increase in its dividend, based on the past 6 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
From a dividend perspective, should investors buy or avoid FS Bancorp? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the 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. Overall, FS Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for FS Bancorp? See what the three 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.