First Busey Corporation (NASDAQ:BUSE) stock is about to trade ex-dividend in four days. This means that investors who purchase shares on or after the 21st of January will not receive the dividend, which will be paid on the 29th of January.
First Busey's next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.88 per share. Based on the last year's worth of payments, First Busey stock has a trailing yield of around 3.9% on the current share price of $23.54. If you buy this business for its dividend, you should have an idea of whether First Busey'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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately First Busey's payout ratio is modest, at just 47% of profit.
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.
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, First Busey's earnings per share have been growing at 11% 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. In the last 10 years, First Busey has lifted its dividend by approximately 6.7% 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.
To Sum It Up
Is First Busey an attractive dividend stock, or better left on the shelf? Companies like First Busey that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. First Busey 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.
While it's tempting to invest in First Busey for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for First Busey that we strongly recommend you have a look at before investing in the company.
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.
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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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