ESSA Bancorp, Inc. (NASDAQ:ESSA) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy ESSA Bancorp, Inc. (NASDAQ:ESSA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 15th of March will not receive this dividend, which will be paid on the 31st of March.

ESSA Bancorp's next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.44 to shareholders. Based on the last year's worth of payments, ESSA Bancorp stock has a trailing yield of around 2.7% on the current share price of $17.61. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for ESSA Bancorp

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see ESSA Bancorp paying out a modest 30% 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.

Click here to see how much of its profit ESSA Bancorp paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at ESSA Bancorp, with earnings per share up 9.6% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, ESSA Bancorp has lifted its dividend by approximately 9.1% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has ESSA Bancorp got what it takes to maintain its dividend payments? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, ESSA Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while ESSA Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for ESSA Bancorp you should be aware of.

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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