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Is It Smart To Buy People's Utah Bancorp (NASDAQ:PUB) Before It Goes Ex-Dividend?

Simply Wall St

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that People's Utah Bancorp (NASDAQ:PUB) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 1st of November in order to be eligible for this dividend, which will be paid on the 12th of November.

People's Utah Bancorp's next dividend payment will be US$0.1 per share, and in the last 12 months, the company paid a total of US$0.5 per share. Based on the last year's worth of payments, People's Utah Bancorp stock has a trailing yield of around 1.8% on the current share price of $29.07. If you buy this business for its dividend, you should have an idea of whether People's Utah Bancorp's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for People's Utah Bancorp

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. People's Utah Bancorp paid out just 21% 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqCM:PUB Historical Dividend Yield, October 27th 2019

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see People's Utah Bancorp has grown its earnings rapidly, up 20% 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. In the last four years, People's Utah Bancorp has lifted its dividend by approximately 21% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is People's Utah Bancorp worth buying for its dividend? Companies like People's Utah Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, People's Utah Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Wondering what the future holds for People's Utah 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.