Here's What We Like About Sound Financial Bancorp's (NASDAQ:SFBC) Upcoming Dividend

Sound Financial Bancorp, Inc. (NASDAQ:SFBC) stock is about to trade ex-dividend in four 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Sound Financial Bancorp's shares before the 7th of November to receive the dividend, which will be paid on the 22nd of November.

The company's upcoming dividend is US$0.19 a share, following on from the last 12 months, when the company distributed a total of US$0.76 per share to shareholders. Based on the last year's worth of payments, Sound Financial Bancorp stock has a trailing yield of around 2.1% on the current share price of $36.6. If you buy this business for its dividend, you should have an idea of whether Sound Financial Bancorp's dividend is reliable and sustainable. So we need to investigate whether Sound Financial Bancorp can afford its dividend, and if the dividend could grow.

See our latest analysis for Sound Financial Bancorp

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Sound Financial Bancorp has a low and conservative payout ratio of just 4.8% of its income after tax.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Sound Financial Bancorp paid out over the last 12 months.

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. 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, Sound Financial Bancorp's earnings per share have been growing at 12% 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. In the past 10 years, Sound Financial Bancorp has increased its dividend at approximately 14% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Should investors buy Sound Financial Bancorp for the upcoming 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 Sound Financial Bancorp more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Sound Financial Bancorp has 2 warning signs we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.