Interested In Fifth Third Bancorp's (NASDAQ:FITB) Upcoming US$0.37 Dividend? You Have Three Days Left

Readers hoping to buy Fifth Third Bancorp (NASDAQ:FITB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Fifth Third Bancorp investors that purchase the stock on or after the 31st of March will not receive the dividend, which will be paid on the 15th of April.

The company's upcoming dividend is US$0.37 a share, following on from the last 12 months, when the company distributed a total of US$1.48 per share to shareholders. Calculating the last year's worth of payments shows that Fifth Third Bancorp has a trailing yield of 3.7% on the current share price of US$40.17. 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 investigate whether Fifth Third Bancorp can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fifth Third Bancorp paid out a comfortable 46% of its profit last year.

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.

View our latest analysis for Fifth Third Bancorp

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Fifth Third Bancorp's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Fifth Third Bancorp has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Should investors buy Fifth Third Bancorp for the upcoming dividend? Fifth Third Bancorp's earnings per share are basically flat over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

However if you're still interested in Fifth Third Bancorp as a potential investment, you should definitely consider some of the risks involved with Fifth Third Bancorp. In terms of investment risks, we've identified 1 warning sign with Fifth Third Bancorp and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.