Here's What We Like About Signature Bank's (NASDAQ:SBNY) Upcoming Dividend
Readers hoping to buy Signature Bank (NASDAQ:SBNY) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 30th of April, you won't be eligible to receive this dividend, when it is paid on the 14th of May.
Signature Bank's next dividend payment will be US$0.56 per share. Last year, in total, the company distributed US$2.24 to shareholders. Based on the last year's worth of payments, Signature Bank has a trailing yield of 0.9% on the current stock price of $238.84. If you buy this business for its dividend, you should have an idea of whether Signature Bank's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Signature Bank
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. Signature Bank paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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 the company's payout ratio, plus analyst estimates of its future dividends.
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. This is why it's a relief to see Signature Bank earnings per share are up 9.2% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Signature Bank dividends are largely the same as they were three years ago.
The Bottom Line
Should investors buy Signature Bank for the upcoming dividend? Signature Bank has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, Signature Bank appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Signature Bank has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Signature Bank you should know about.
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 editorial-team (at) simplywallst.com.
