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 Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Thus, you can purchase Richmond Mutual Bancorporation's shares before the 5th of December in order to receive the dividend, which the company will pay on the 19th of December.
The company's next dividend payment will be US$0.14 per share. Last year, in total, the company distributed US$0.56 to shareholders. Based on the last year's worth of payments, Richmond Mutual Bancorporation stock has a trailing yield of around 3.9% on the current share price of US$14.32. 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.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Richmond Mutual Bancorporation is paying out an acceptable 64% of its profit, a common payout level among most companies.
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 how much of its profit Richmond Mutual Bancorporation paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Richmond Mutual Bancorporation earnings per share are up 2.6% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Richmond Mutual Bancorporation has delivered 23% dividend growth per year on average over the past five years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Is Richmond Mutual Bancorporation worth buying for its dividend? Richmond Mutual Bancorporation has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We think there are likely better opportunities out there.
Keen to explore more data on Richmond Mutual Bancorporation's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.
