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Readers hoping to buy Independent Bank Corp. (NASDAQ:INDB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 26th of March in order to be eligible for this dividend, which will be paid on the 9th of April.
Independent Bank's next dividend payment will be US$0.48 per share, on the back of last year when the company paid a total of US$1.84 to shareholders. Calculating the last year's worth of payments shows that Independent Bank has a trailing yield of 2.1% on the current share price of $90.57. If you buy this business for its dividend, you should have an idea of whether Independent Bank's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Independent Bank paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Independent Bank earnings per share are up 7.7% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Independent Bank has delivered 10% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Has Independent Bank got what it takes to maintain its dividend payments? Independent Bank has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.
With that being said, if dividends aren't your biggest concern with Independent Bank, you should know about the other risks facing this business. Every company has risks, and we've spotted 1 warning sign for Independent Bank you should know about.
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.
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.
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