Sound Financial Bancorp, Inc. (NASDAQ:SFBC) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 7th of February will not receive this dividend, which will be paid on the 24th of February.
Sound Financial Bancorp's next dividend payment will be US$0.35 per share. Last year, in total, the company distributed US$0.60 to shareholders. Looking at the last 12 months of distributions, Sound Financial Bancorp has a trailing yield of approximately 1.6% on its current stock price of $36.65. If you buy this business for its dividend, you should have an idea of whether Sound Financial Bancorp's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sound Financial Bancorp has a low and conservative payout ratio of just 21% of its income after tax.
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.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Sound Financial Bancorp, with earnings per share up 9.4% on average 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. In the past ten years, Sound Financial Bancorp has increased its dividend at approximately 14% 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.
Is Sound Financial Bancorp an attractive dividend stock, or better left on the shelf? Sound Financial Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Sound Financial 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.
Want to learn more about Sound Financial Bancorp's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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. Thank you for reading.