Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Signature Bank (NASDAQ:SBNY) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 30th of January will not receive this dividend, which will be paid on the 14th of February.
Signature Bank's next dividend payment will be US$0.56 per share, on the back of last year when the company paid a total of US$2.24 to shareholders. Last year's total dividend payments show that Signature Bank has a trailing yield of 1.5% on the current share price of $145.8. If you buy this business for its dividend, you should have an idea of whether Signature Bank's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Signature Bank paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Signature Bank's earnings per share have risen 13% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Signature Bank dividends are largely the same as they were two years ago.
To Sum It Up
Should investors buy Signature Bank for the upcoming dividend? Companies like Signature Bank that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Signature Bank 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.
Ever wonder what the future holds for Signature Bank? See what the 14 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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.
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