Shore Bancshares, Inc. (NASDAQ:SHBI) Passed Our Checks, And It's About To Pay A US$0.12 Dividend

Readers hoping to buy Shore Bancshares, Inc. (NASDAQ:SHBI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 11th of February will not receive the dividend, which will be paid on the 1st of March.

Shore Bancshares's next dividend payment will be US$0.12 per share. Last year, in total, the company distributed US$0.48 to shareholders. Last year's total dividend payments show that Shore Bancshares has a trailing yield of 3.3% on the current share price of $14.58. If you buy this business for its dividend, you should have an idea of whether Shore Bancshares's dividend is reliable and sustainable. So we need to investigate whether Shore Bancshares can afford its dividend, and if the dividend could grow.

View our latest analysis for Shore Bancshares

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Shore Bancshares's payout ratio is modest, at just 38% of profit.

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 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Shore Bancshares's earnings per share have been growing at 18% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Shore Bancshares has delivered 7.2% dividend growth per year on average over the past 10 years. 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.

To Sum It Up

Is Shore Bancshares worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Shore Bancshares 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.

While it's tempting to invest in Shore Bancshares for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 3 warning signs for Shore Bancshares (1 is a bit concerning!) that you ought to be aware of before buying the shares.

If you're in the market for dividend stocks, we recommend checking our list of top 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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