Should You Buy Banner Corporation (NASDAQ:BANR) For Its Upcoming Dividend?

Readers hoping to buy Banner Corporation (NASDAQ:BANR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Banner's shares on or after the 2nd of November will not receive the dividend, which will be paid on the 13th of November.

The company's next dividend payment will be US$0.48 per share, and in the last 12 months, the company paid a total of US$1.92 per share. Based on the last year's worth of payments, Banner stock has a trailing yield of around 4.6% on the current share price of $41.84. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Banner

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 Banner paying out a modest 33% of its earnings.

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. That's why it's comforting to see Banner's earnings have been skyrocketing, up 25% per annum 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 past 10 years, Banner has increased its dividend at approximately 47% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Banner 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. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Banner looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

So while Banner looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 2 warning signs for Banner (1 is a bit concerning!) that deserve your attention before investing in the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.