Is It Smart To Buy ServisFirst Bancshares, Inc. (NASDAQ:SFBS) Before It Goes Ex-Dividend?
ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is about to trade ex-dividend in the next four days. Investors can purchase shares before the 30th of September in order to be eligible for this dividend, which will be paid on the 9th of October.
ServisFirst Bancshares's upcoming dividend is US$0.17 a share, following on from the last 12 months, when the company distributed a total of US$0.70 per share to shareholders. Last year's total dividend payments show that ServisFirst Bancshares has a trailing yield of 2.2% on the current share price of $32.35. If you buy this business for its dividend, you should have an idea of whether ServisFirst Bancshares's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for ServisFirst 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. ServisFirst Bancshares has a low and conservative payout ratio of just 24% of its income after tax.
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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see ServisFirst Bancshares has grown its earnings rapidly, up 21% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ServisFirst Bancshares has delivered an average of 38% per year annual increase in its dividend, based on the past six years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
From a dividend perspective, should investors buy or avoid ServisFirst Bancshares? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating ServisFirst Bancshares more closely.
On that note, you'll want to research what risks ServisFirst Bancshares is facing. Every company has risks, and we've spotted 3 warning signs for ServisFirst Bancshares (of which 1 doesn't sit too well with us!) 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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