Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see IBERIABANK Corporation (NASDAQ:IBKC) is about to trade ex-dividend in the next 2 days. If you purchase the stock on or after the 27th of September, you won't be eligible to receive this dividend, when it is paid on the 25th of October.
IBERIABANK's next dividend payment will be US$0.5 per share, and in the last 12 months, the company paid a total of US$1.8 per share. Last year's total dividend payments show that IBERIABANK has a trailing yield of 2.4% on the current share price of $76.29. If you buy this business for its dividend, you should have an idea of whether IBERIABANK's dividend is reliable and sustainable. 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. IBERIABANK paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see IBERIABANK has grown its earnings rapidly, up 28% a year 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. Since the start of our data, ten years ago, IBERIABANK has lifted its dividend by approximately 2.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because IBERIABANK is keeping back more of its profits to grow the business.
The Bottom Line
Should investors buy IBERIABANK for the upcoming 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. IBERIABANK ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Ever wonder what the future holds for IBERIABANK? See what the eight 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 email@example.com. 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.