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 ESSA Bancorp, Inc. (NASDAQ:ESSA) is about to go ex-dividend in just 4 days. This means that investors who purchase shares on or after the 13th of December will not receive the dividend, which will be paid on the 30th of December.
ESSA Bancorp's upcoming dividend is US$0.11 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Looking at the last 12 months of distributions, ESSA Bancorp has a trailing yield of approximately 2.5% on its current stock price of $17.6. 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 check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ESSA Bancorp paid out a comfortable 34% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. This is why it's a relief to see ESSA Bancorp earnings per share are up 8.4% 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. ESSA Bancorp has delivered 11% dividend growth per year on average over the past ten years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is ESSA Bancorp an attractive dividend stock, or better left on the shelf? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, ESSA Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Want to learn more about ESSA Bancorp? Here's a visualisation of its historical rate of revenue and earnings growth.
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.
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.
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