First Business Financial Services, Inc. (NASDAQ:FBIZ) stock is about to trade ex-dividend in 4 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase First Business Financial Services’ shares on or after the 14th of February will not receive the dividend, which will be paid on the 28th of February.
The company’s next dividend payment will be US$0.29 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Based on the last year’s worth of payments, First Business Financial Services has a trailing yield of 2.1% on the current stock price of US$55.10. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it’s growing.
View our latest analysis for First Business Financial Services
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. First Business Financial Services has a low and conservative payout ratio of just 19% of its income after tax.
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.
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we’re glad to see First Business Financial Services’s earnings per share have risen 14% per annum over the last five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. First Business Financial Services has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
