Is It Smart To Buy South Plains Financial, Inc. (NASDAQ:SPFI) Before It Goes Ex-Dividend?
It looks like South Plains Financial, Inc. (NASDAQ:SPFI) 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase South Plains Financial's shares before the 30th of July in order to be eligible for the dividend, which will be paid on the 16th of August.
The company's upcoming dividend is US$0.09 a share, following on from the last 12 months, when the company distributed a total of US$0.28 per share to shareholders. Based on the last year's worth of payments, South Plains Financial stock has a trailing yield of around 1.5% on the current share price of $23.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether South Plains Financial has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for South Plains Financial
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. South Plains Financial is paying out just 5.4% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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 South Plains Financial's earnings per share have risen 13% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. South Plains Financial has delivered 73% dividend growth per year on average over the past two years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Has South Plains Financial got what it takes to maintain its dividend payments? 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. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, South Plains Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while South Plains Financial has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for South Plains Financial (1 is concerning) you should be aware of.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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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