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FS Bancorp, Inc. (NASDAQ:FSBW) stock is about to trade ex-dividend in four days. You can purchase shares before the 10th of February in order to receive the dividend, which the company will pay on the 25th of February.
FS Bancorp's next dividend payment will be US$0.26 per share. Last year, in total, the company distributed US$1.04 to shareholders. Last year's total dividend payments show that FS Bancorp has a trailing yield of 1.8% on the current share price of $58.86. 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 FS Bancorp has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for FS Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. FS Bancorp paid out just 9.2% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. FS Bancorp paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see FS Bancorp's earnings have been skyrocketing, up 25% 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, FS Bancorp has lifted its dividend by approximately 23% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
From a dividend perspective, should investors buy or avoid FS Bancorp? Companies like FS Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. FS Bancorp 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.