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Readers hoping to buy Independent Bank Corp. (NASDAQ:INDB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 25th of September in order to receive the dividend, which the company will pay on the 9th of October.
Independent Bank's next dividend payment will be US$0.46 per share. Last year, in total, the company distributed US$1.84 to shareholders. Calculating the last year's worth of payments shows that Independent Bank has a trailing yield of 3.4% on the current share price of $54.2. If you buy this business for its dividend, you should have an idea of whether Independent 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.
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 Independent Bank paying out a modest 41% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. Fortunately for readers, Independent Bank's earnings per share have been growing at 12% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Independent Bank has lifted its dividend by approximately 9.8% 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.
Should investors buy Independent Bank for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the 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. We think this is a pretty attractive combination, and would be interested in investigating Independent Bank more closely.
While it's tempting to invest in Independent Bank for the dividends alone, you should always be mindful of the risks involved. For example, Independent Bank has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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