Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, ServisFirst Bancshares Inc (NASDAQ:SFBS) has been paying a dividend to shareholders. Today it yields 1.2%. Does ServisFirst Bancshares tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does ServisFirst Bancshares fit our criteria?
The company currently pays out 17% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SFBS’s payout to remain around the same level at 16% of its earnings, which leads to a dividend yield of around 1.2%. Moreover, EPS should increase to $2.73.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view ServisFirst Bancshares as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, ServisFirst Bancshares has a yield of 1.2%, which is on the low-side for Banks stocks.
Now you know to keep in mind the reason why investors should be careful investing in ServisFirst Bancshares for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SFBS’s future growth? Take a look at our free research report of analyst consensus for SFBS’s outlook.
- Valuation: What is SFBS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SFBS is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.