Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that First Mid Bancshares, Inc. (NASDAQ:FMBH) is about to go ex-dividend in just four days. 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. This means that investors who purchase First Mid Bancshares' shares on or after the 16th of August will not receive the dividend, which will be paid on the 30th of August.
The company's next dividend payment will be US$0.24 per share, and in the last 12 months, the company paid a total of US$0.96 per share. Last year's total dividend payments show that First Mid Bancshares has a trailing yield of 2.6% on the current share price of US$37.24. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. First Mid Bancshares paid out a comfortable 29% of its profit last year.
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?
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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at First Mid Bancshares, with earnings per share up 4.0% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, First Mid Bancshares has lifted its dividend by approximately 8.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Has First Mid Bancshares got what it takes to maintain its dividend payments? First Mid Bancshares has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, First Mid Bancshares looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while First Mid Bancshares has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 2 warning signs for First Mid Bancshares you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.