Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Fidelity D & D Bancorp, Inc. (NASDAQ:FDBC) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 19th of November, you won't be eligible to receive this dividend, when it is paid on the 10th of December.
Fidelity D & D Bancorp's next dividend payment will be US$0.30 per share, and in the last 12 months, the company paid a total of US$1.20 per share. Last year's total dividend payments show that Fidelity D & D Bancorp has a trailing yield of 2.0% on the current share price of $58.6. If you buy this business for its dividend, you should have an idea of whether Fidelity D & D Bancorp's dividend is reliable and sustainable. 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. Fortunately Fidelity D & D Bancorp's payout ratio is modest, at just 45% of profit.
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?
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. This is why it's a relief to see Fidelity D & D Bancorp earnings per share are up 7.1% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Fidelity D & D Bancorp has delivered 6.1% dividend growth per year on average over the past 10 years. 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
Is Fidelity D & D Bancorp an attractive dividend stock, or better left on the shelf? Fidelity D & D Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Fidelity D & D Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in Fidelity D & D Bancorp for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Fidelity D & D Bancorp that we recommend you consider before investing in the business.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you’re looking to trade Fidelity D & D Bancorp, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.