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Readers hoping to buy First US Bancshares, Inc. (NASDAQ:FUSB) 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. This means that investors who purchase First US Bancshares' shares on or after the 8th of December will not receive the dividend, which will be paid on the 3rd of January.
The company's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.12 per share. Last year's total dividend payments show that First US Bancshares has a trailing yield of 2.3% on the current share price of $8.6. 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! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for First US Bancshares
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. First US Bancshares has a low and conservative payout ratio of just 12% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit First US Bancshares 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. That's why it's comforting to see First US Bancshares's earnings have been skyrocketing, up 41% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, eight years ago, First US Bancshares has lifted its dividend by approximately 22% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
From a dividend perspective, should investors buy or avoid First US Bancshares? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, First US Bancshares appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.