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ServisFirst Bancshares, Inc. (NASDAQ:SFBS) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 30th of September in order to be eligible for this dividend, which will be paid on the 11th of October.
ServisFirst Bancshares's next dividend payment will be US$0.1 per share, on the back of last year when the company paid a total of US$0.6 to shareholders. Looking at the last 12 months of distributions, ServisFirst Bancshares has a trailing yield of approximately 1.8% on its current stock price of $33.545. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
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. ServisFirst Bancshares is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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.
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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see ServisFirst Bancshares's earnings have been skyrocketing, up 22% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, five years ago, ServisFirst Bancshares has lifted its dividend by approximately 27% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
From a dividend perspective, should investors buy or avoid ServisFirst Bancshares? 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 strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. ServisFirst Bancshares 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 ServisFirst Bancshares? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you're in the market for dividend stocks, we recommend checking our list of top 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 email@example.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.