Is It Smart To Buy Sterling Bancorp (NYSE:STL) Before It Goes Ex-Dividend?
Sterling Bancorp (NYSE:STL) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 30th of October to receive the dividend, which will be paid on the 16th of November.
Sterling Bancorp's upcoming dividend is US$0.07 a share, following on from the last 12 months, when the company distributed a total of US$0.28 per share to shareholders. Last year's total dividend payments show that Sterling Bancorp has a trailing yield of 2.1% on the current share price of $13.58. If you buy this business for its dividend, you should have an idea of whether Sterling Bancorp'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.
See our latest analysis for Sterling Bancorp
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Sterling Bancorp has a low and conservative payout ratio of just 22% of its income after tax.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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, Sterling Bancorp'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. Sterling Bancorp has delivered an average of 1.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Sterling Bancorp is keeping back more of its profits to grow the business.
To Sum It Up
From a dividend perspective, should investors buy or avoid Sterling Bancorp? 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 Sterling Bancorp more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Sterling Bancorp and you should be aware of these before buying any shares.
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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