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Readers hoping to buy Simmons First National Corporation (NASDAQ:SFNC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase Simmons First National's shares before the 13th of December in order to receive the dividend, which the company will pay on the 2nd of January.
The company's upcoming dividend is US$0.21 a share, following on from the last 12 months, when the company distributed a total of US$0.84 per share to shareholders. Looking at the last 12 months of distributions, Simmons First National has a trailing yield of approximately 3.5% on its current stock price of US$24.24. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Simmons First National has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Simmons First National
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. Its dividend payout ratio is 81% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. Simmons First National's earnings per share have fallen at approximately 15% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Simmons First National has delivered 6.7% dividend growth per year on average over the past 10 years. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Simmons First National is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.