Here's What We Like About Summit Financial Group's (NASDAQ:SMMF) Upcoming Dividend

It looks like Summit Financial Group, Inc. (NASDAQ:SMMF) is about to go ex-dividend in the next four days. Investors can purchase shares before the 14th of December in order to be eligible for this dividend, which will be paid on the 31st of December.

Summit Financial Group's next dividend payment will be US$0.17 per share, and in the last 12 months, the company paid a total of US$0.68 per share. Based on the last year's worth of payments, Summit Financial Group has a trailing yield of 3.1% on the current stock price of $21.99. If you buy this business for its dividend, you should have an idea of whether Summit Financial Group's dividend is reliable and sustainable. So we need to investigate whether Summit Financial Group can afford its dividend, and if the dividend could grow.

See our latest analysis for Summit Financial Group

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 Summit Financial Group's payout ratio is modest, at just 29% of profit.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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, Summit Financial Group's earnings per share have been growing at 10% 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. Summit Financial Group has delivered 13% dividend growth per year on average over the past six years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has Summit Financial Group got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Summit Financial Group more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 3 warning signs with Summit Financial Group and understanding them should be part of your investment process.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you’re looking to trade Summit Financial Group, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.