Is It Smart To Buy FS Bancorp, Inc. (NASDAQ:FSBW) Before It Goes Ex-Dividend?
FS Bancorp, Inc. (NASDAQ:FSBW) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase FS Bancorp's shares before the 7th of February in order to receive the dividend, which the company will pay on the 22nd of February.
The company's next dividend payment will be US$0.26 per share, and in the last 12 months, the company paid a total of US$1.04 per share. Calculating the last year's worth of payments shows that FS Bancorp has a trailing yield of 2.9% on the current share price of US$36.30. If you buy this business for its dividend, you should have an idea of whether FS 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 FS Bancorp
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. FS Bancorp paid out just 22% 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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at FS Bancorp, with earnings per share up 7.3% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, FS Bancorp has lifted its dividend by approximately 26% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is FS Bancorp an attractive dividend stock, or better left on the shelf? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. FS 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.
Curious what other investors think of FS Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
