Investors Bancorp, Inc. (NASDAQ:ISBC) stock is about to trade ex-dividend in four days. Ex-dividend means that investors that purchase the stock on or after the 9th of November will not receive this dividend, which will be paid on the 25th of November.
Investors Bancorp's next dividend payment will be US$0.12 per share, and in the last 12 months, the company paid a total of US$0.48 per share. Based on the last year's worth of payments, Investors Bancorp has a trailing yield of 5.5% on the current stock price of $8.71. If you buy this business for its dividend, you should have an idea of whether Investors Bancorp's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Investors Bancorp paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 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 Investors Bancorp's earnings per share have risen 16% 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. Investors Bancorp has delivered 25% dividend growth per year on average over the past eight years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
From a dividend perspective, should investors buy or avoid Investors Bancorp? Investors Bancorp has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Overall, Investors 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 Investors Bancorp for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Investors Bancorp you should know about.
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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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.
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