Is It Smart To Buy First Horizon Corporation (NYSE:FHN) Before It Goes Ex-Dividend?

First Horizon Corporation (NYSE:FHN) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase First Horizon's shares on or after the 14th of March, you won't be eligible to receive the dividend, when it is paid on the 1st of April.

The company's next dividend payment will be US$0.15 per share, and in the last 12 months, the company paid a total of US$0.60 per share. Looking at the last 12 months of distributions, First Horizon has a trailing yield of approximately 3.2% on its current stock price of US$18.88. If you buy this business for its dividend, you should have an idea of whether First Horizon's dividend is reliable and sustainable. So we need to investigate whether First Horizon can afford its dividend, and if the dividend could grow.

View our latest analysis for First Horizon

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. That's why it's good to see First Horizon paying out a modest 44% of its earnings.

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 that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that First Horizon's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. First Horizon has delivered 12% dividend growth per year on average over the past 10 years.

The Bottom Line

Has First Horizon got what it takes to maintain its dividend payments? Earnings per share have been flat in recent years, although First Horizon reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating First Horizon more closely.

Wondering what the future holds for First Horizon? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.