Should You Buy Investar Holding Corporation (NASDAQ:ISTR) For Its Upcoming Dividend?

Investar Holding Corporation (NASDAQ:ISTR) stock is about to trade ex-dividend in three days. If you purchase the stock on or after the 24th of December, you won't be eligible to receive this dividend, when it is paid on the 31st of January.

Investar Holding's upcoming dividend is US$0.065 a share, following on from the last 12 months, when the company distributed a total of US$0.26 per share to shareholders. Looking at the last 12 months of distributions, Investar Holding has a trailing yield of approximately 1.6% on its current stock price of $16.55. If you buy this business for its dividend, you should have an idea of whether Investar Holding's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Investar Holding

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. Investar Holding paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Investar Holding earnings per share are up 3.8% per annum over the last five years.

We'd also point out that Investar Holding issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Investar Holding has delivered 46% dividend growth per year on average over the past six years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Should investors buy Investar Holding for the upcoming dividend? Investar Holding has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Investar Holding 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 Investar Holding for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Investar Holding that we recommend you consider before investing in the business.

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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