There's A Lot To Like About First Mid Bancshares' (NASDAQ:FMBH) Upcoming US$0.23 Dividend
First Mid Bancshares, Inc. (NASDAQ:FMBH) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase First Mid Bancshares' shares before the 11th of August in order to be eligible for the dividend, which will be paid on the 1st of September.
The company's next dividend payment will be US$0.23 per share. Last year, in total, the company distributed US$0.92 to shareholders. Calculating the last year's worth of payments shows that First Mid Bancshares has a trailing yield of 3.0% on the current share price of $30.58. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether First Mid Bancshares can afford its dividend, and if the dividend could grow.
View our latest analysis for First Mid Bancshares
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. First Mid Bancshares paid out a comfortable 25% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 First Mid Bancshares's earnings per share have risen 11% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, First Mid Bancshares has increased its dividend at approximately 8.2% 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.
The Bottom Line
Is First Mid 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. First Mid Bancshares 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.
In light of that, while First Mid Bancshares has an appealing dividend, it's worth knowing the risks involved with this stock. For example - First Mid Bancshares has 1 warning sign we think you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
