It looks like Simmons First National Corporation (NASDAQ:SFNC) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 13th of September, you won’t be eligible to receive this dividend, when it is paid on the 4th of October.
Simmons First National’s upcoming dividend is US$0.16 a share, following on from the last 12 months, when the company distributed a total of US$0.64 per share to shareholders. Looking at the last 12 months of distributions, Simmons First National has a trailing yield of approximately 2.7% on its current stock price of $23.59. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
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. That’s why it’s good to see Simmons First National paying out a modest 27% 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 earnings fall far enough, the company could be forced to cut its dividend. That’s why it’s comforting to see Simmons First National’s earnings have been skyrocketing, up 26% per annum 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. Simmons First National has delivered an average of 5.4% per year annual increase in its dividend, based on the past ten years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Simmons First National is keeping back more of its profits to grow the business.
To Sum It Up
Should investors buy Simmons First National for the upcoming dividend? 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. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Simmons First National looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Ever wonder what the future holds for Simmons First National? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.