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Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Independent Bank Corp. (NASDAQ:INDB) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 28th of June will not receive this dividend, which will be paid on the 12th of July.
Independent Bank’s next dividend payment will be US$0.44 per share, on the back of last year when the company paid a total of US$1.76 to shareholders. Based on the last year’s worth of payments, Independent Bank has a trailing yield of 2.3% on the current stock price of $75.13. 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 Independent Bank can afford its dividend, and if the dividend could grow.
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. That’s why it’s good to see Independent Bank paying out a modest 34% of its earnings.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Independent Bank’s earnings per share have been growing at 16% a year for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Independent Bank has delivered an average of 9.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Has Independent Bank got what it takes to maintain its dividend payments? 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 strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. Independent Bank 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.
Ever wonder what the future holds for Independent Bank? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.