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Readers hoping to buy Banc of California, Inc. (NYSE:BANC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Banc of California investors that purchase the stock on or after the 14th of June will not receive the dividend, which will be paid on the 3rd of July.
The company's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Calculating the last year's worth of payments shows that Banc of California has a trailing yield of 3.1% on the current share price of $12.78. If you buy this business for its dividend, you should have an idea of whether Banc of California's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Banc of California
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. Banc of California has a low and conservative payout ratio of just 18% of its income after tax.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Banc of California has grown its earnings rapidly, up 20% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Banc of California's dividend payments per share have declined at 1.8% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
Should investors buy Banc of California for the upcoming dividend? Companies like Banc of California that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Banc of California ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.