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It looks like Provident Financial Services, Inc. (NYSE:PFS) is about to go ex-dividend in the next three 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. Thus, you can purchase Provident Financial Services' shares before the 12th of August in order to receive the dividend, which the company will pay on the 27th of August.
The company's next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.92 per share. Based on the last year's worth of payments, Provident Financial Services has a trailing yield of 4.1% on the current stock price of $22.46. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Provident Financial Services has been able to grow its dividends, or if the dividend might be cut.
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. That's why it's good to see Provident Financial Services paying out a modest 43% of its earnings.
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.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Provident Financial Services earnings per share are up 9.9% 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. Provident Financial Services has delivered 7.7% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is Provident Financial Services an attractive dividend stock, or better left on the shelf? Provident Financial Services 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. We think this is a pretty attractive combination, and would be interested in investigating Provident Financial Services more closely.
So while Provident Financial Services looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Provident Financial Services has 3 warning signs (and 1 which is concerning) we think you should know about.
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.
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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