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It looks like First Interstate BancSystem, Inc. (NASDAQ:FIBK) is about to go ex-dividend in the next four days. You can purchase shares before the 10th of May in order to receive the dividend, which the company will pay on the 21st of May.
First Interstate BancSystem's next dividend payment will be US$0.41 per share, on the back of last year when the company paid a total of US$1.64 to shareholders. Looking at the last 12 months of distributions, First Interstate BancSystem has a trailing yield of approximately 3.4% on its current stock price of $47.76. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether First Interstate BancSystem can afford its dividend, and if the dividend could grow.
Check out our latest analysis for First Interstate BancSystem
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. First Interstate BancSystem paid out more than half (53%) of its earnings last year, which is a regular payout ratio for 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 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. With that in mind, we're encouraged by the steady growth at First Interstate BancSystem, with earnings per share up 8.7% 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 Interstate BancSystem has lifted its dividend by approximately 14% a year on average. 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.
The Bottom Line
Is First Interstate BancSystem worth buying for its dividend? First Interstate BancSystem 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're unconvinced on the company's merits, and think there might be better opportunities out there.