Republic Bancorp (NASDAQ:RBCA.A) Could Be A Buy For Its Upcoming Dividend
It looks like Republic Bancorp, Inc. (NASDAQ:RBCA.A) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Republic Bancorp's shares on or after the 15th of December will not receive the dividend, which will be paid on the 20th of January.
The company's upcoming dividend is US$0.34 a share, following on from the last 12 months, when the company distributed a total of US$1.36 per share to shareholders. Based on the last year's worth of payments, Republic Bancorp has a trailing yield of 3.3% on the current stock price of $41.94. If you buy this business for its dividend, you should have an idea of whether Republic Bancorp'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 Republic Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Republic Bancorp's payout ratio is modest, at just 30% of profit.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. For this reason, we're glad to see Republic Bancorp's earnings per share have risen 15% 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. Republic Bancorp has delivered 8.3% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is Republic Bancorp worth buying for its dividend? Companies like Republic Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Republic Bancorp 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.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for Republic Bancorp you should be aware of.
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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