There's A Lot To Like About FS Bancorp's (NASDAQ:FSBW) Upcoming US$0.28 Dividend

FS Bancorp, Inc. (NASDAQ:FSBW) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase FS Bancorp's shares before the 8th of May in order to be eligible for the dividend, which will be paid on the 22nd of May.

The company's next dividend payment will be US$0.28 per share. Last year, in total, the company distributed US$1.12 to shareholders. Based on the last year's worth of payments, FS Bancorp stock has a trailing yield of around 2.8% on the current share price of US$40.11. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

We check all companies for important risks. See what we found for FS Bancorp in our free report.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. FS Bancorp paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

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.

See our latest analysis for FS Bancorp

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

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see FS Bancorp's earnings per share have risen 12% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, FS Bancorp has lifted its dividend by approximately 25% 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.

To Sum It Up

Is FS Bancorp worth buying for its dividend? 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. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating FS Bancorp more closely.

Wondering what the future holds for FS Bancorp? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.