Should You Buy International Bancshares Corporation (NASDAQ:IBOC) For Its Upcoming Dividend?

By
Simply Wall St
Published
August 14, 2021
NasdaqGS:IBOC
Source: Shutterstock

International Bancshares Corporation (NASDAQ:IBOC) stock is about to trade ex-dividend in three days. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, International Bancshares investors that purchase the stock on or after the 19th of August will not receive the dividend, which will be paid on the 3rd of September.

The company's upcoming dividend is US$0.60 a share, following on from the last 12 months, when the company distributed a total of US$1.10 per share to shareholders. Based on the last year's worth of payments, International Bancshares has a trailing yield of 2.8% on the current stock price of $42.47. If you buy this business for its dividend, you should have an idea of whether International Bancshares's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for International Bancshares

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see International Bancshares paying out a modest 30% of its earnings.

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.

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

historic-dividend
NasdaqGS:IBOC Historic Dividend August 15th 2021

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. For this reason, we're glad to see International Bancshares's earnings per share have risen 12% per annum 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. In the past 10 years, International Bancshares has increased its dividend at approximately 12% 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.

Final Takeaway

Should investors buy International Bancshares for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. International Bancshares 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.

Keen to explore more data on International Bancshares's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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.

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