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SB One Bancorp (NASDAQ:SBBX)'s Could Be A Buy For Its Upcoming Dividend

Simply Wall St

SB One Bancorp (NASDAQ:SBBX) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 12th of August in order to be eligible for this dividend, which will be paid on the 27th of August.

SB One Bancorp's next dividend payment will be US$0.085 per share, and in the last 12 months, the company paid a total of US$0.34 per share. Based on the last year's worth of payments, SB One Bancorp stock has a trailing yield of around 1.5% on the current share price of $22.55. 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.

See our latest analysis for SB One Bancorp

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. SB One Bancorp paid out just 15% 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.

NasdaqGM:SBBX Historical Dividend Yield, August 7th 2019

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. It's encouraging to see SB One Bancorp has grown its earnings rapidly, up 40% 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. SB One Bancorp has delivered 2.7% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Is SB One Bancorp an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating SB One Bancorp more closely.

Wondering what the future holds for SB One Bancorp? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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 editorial-team@simplywallst.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.