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It looks like Financial Institutions, Inc. (NASDAQ:FISI) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 18th of March in order to be eligible for this dividend, which will be paid on the 2nd of April.
Financial Institutions's next dividend payment will be US$0.27 per share, on the back of last year when the company paid a total of US$1.04 to shareholders. Looking at the last 12 months of distributions, Financial Institutions has a trailing yield of approximately 3.4% on its current stock price of $32. If you buy this business for its dividend, you should have an idea of whether Financial Institutions's dividend is reliable and sustainable. So we need to investigate whether Financial Institutions can afford its dividend, and if the dividend could grow.
See our latest analysis for Financial Institutions
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Financial Institutions paying out a modest 45% of its earnings.
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?
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Financial Institutions, with earnings per share up 3.8% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Financial Institutions has delivered 10% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid Financial Institutions? Financial Institutions 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. In summary, Financial Institutions appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.