Independent Bank Corporation (NASDAQ:IBCP) stock is about to trade ex-dividend in 3 days. Investors can purchase shares before the 3rd of August in order to be eligible for this dividend, which will be paid on the 14th of August.
Independent Bank’s next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$0.80 to shareholders. Looking at the last 12 months of distributions, Independent Bank has a trailing yield of approximately 5.6% on its current stock price of $14.17. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is 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 Independent Bank paying out a modest 36% 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 earnings fall far enough, the company could be forced to cut its dividend. That’s why it’s comforting to see Independent Bank’s earnings have been skyrocketing, up 21% per annum for the past five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Independent Bank has increased its dividend at approximately 7.2% a year on average. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Is Independent Bank an attractive dividend stock, or better left on the shelf? 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. Independent Bank ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we’ve found 2 warning signs for Independent Bank (1 is a bit concerning!) that deserve your attention before investing in the shares.
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.
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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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