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Readers hoping to buy FB Financial Corporation (NYSE:FBK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, FB Financial investors that purchase the stock on or after the 5th of November will not receive the dividend, which will be paid on the 19th of November.
The company's upcoming dividend is US$0.17 a share, following on from the last 12 months, when the company distributed a total of US$0.68 per share to shareholders. Calculating the last year's worth of payments shows that FB Financial has a trailing yield of 1.3% on the current share price of US$50.38. If you buy this business for its dividend, you should have an idea of whether FB Financial's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for FB Financial
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. FB Financial has a low and conservative payout ratio of just 6.5% 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.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that FB Financial's earnings are down 2.4% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last seven years, FB Financial has lifted its dividend by approximately 16% a year on average.
The Bottom Line
Is FB Financial worth buying for its dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.