Stellar Bancorp, Inc. (NYSE:STEL) Is About To Go Ex-Dividend, And It Pays A 2.3% Yield

It looks like Stellar Bancorp, Inc. (NYSE:STEL) is about to go ex-dividend in the next 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Stellar Bancorp's shares before the 14th of June in order to be eligible for the dividend, which will be paid on the 28th of June.

The company's next dividend payment will be US$0.13 per share. Last year, in total, the company distributed US$0.52 to shareholders. Last year's total dividend payments show that Stellar Bancorp has a trailing yield of 2.3% on the current share price of US$22.37. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Stellar 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. Stellar Bancorp paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Stellar Bancorp's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all 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. Stellar Bancorp has delivered an average of 6.8% per year annual increase in its dividend, based on the past four years of dividend payments.

To Sum It Up

From a dividend perspective, should investors buy or avoid Stellar Bancorp? Stellar Bancorp's earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Stellar Bancorp, you should know about the other risks facing this business. For example, we've found 2 warning signs for Stellar Bancorp (1 is a bit concerning!) that deserve your attention before investing in the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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

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.