Spirit of Texas Bancshares (NASDAQ:STXB) Could Be A Buy For Its Upcoming Dividend
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 Spirit of Texas Bancshares, Inc. (NASDAQ:STXB) is about to go ex-dividend in just 4 days. You can purchase shares before the 24th of March in order to receive the dividend, which the company will pay on the 29th of March.
The upcoming dividend for Spirit of Texas Bancshares is US$0.09 per share. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Spirit of Texas Bancshares can afford its dividend, and if the dividend could grow.
See our latest analysis for Spirit of Texas Bancshares
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Spirit of Texas Bancshares paid out just 9.0% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. That's why it's comforting to see Spirit of Texas Bancshares's earnings have been skyrocketing, up 30% per annum for the past five years.
This is Spirit of Texas Bancshares's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.
The Bottom Line
Is Spirit of Texas Bancshares an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the 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, Spirit of Texas Bancshares looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while Spirit of Texas Bancshares looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 4 warning signs for Spirit of Texas Bancshares (of which 1 is a bit unpleasant!) you should know about.
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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