Why You Might Be Interested In First Guaranty Bancshares, Inc. (NASDAQ:FGBI) 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 First Guaranty Bancshares, Inc. (NASDAQ:FGBI) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, First Guaranty Bancshares investors that purchase the stock on or after the 22nd of June will not receive the dividend, which will be paid on the 30th of June.
The company's next dividend payment will be US$0.16 per share, on the back of last year when the company paid a total of US$0.64 to shareholders. Calculating the last year's worth of payments shows that First Guaranty Bancshares has a trailing yield of 5.1% on the current share price of $12.67. 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.
View our latest analysis for First Guaranty 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. That's why it's good to see First Guaranty Bancshares paying out a modest 31% of its earnings.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, First Guaranty Bancshares's earnings per share have been growing at 12% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, First Guaranty Bancshares has increased its dividend at approximately 3.9% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
Is First Guaranty Bancshares an attractive dividend stock, or better left on the shelf? Companies like First Guaranty Bancshares that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their 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, First Guaranty Bancshares looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in First Guaranty Bancshares for the dividends alone, you should always be mindful of the risks involved. Be aware that First Guaranty Bancshares is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
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