Readers hoping to buy Allegiance Bancshares, Inc. (NASDAQ:ABTX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Allegiance Bancshares' shares on or after the 27th of May will not receive the dividend, which will be paid on the 15th of June.
The company's next dividend payment will be US$0.12 per share. Last year, in total, the company distributed US$0.48 to shareholders. Last year's total dividend payments show that Allegiance Bancshares has a trailing yield of 1.2% on the current share price of $41.12. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Allegiance Bancshares
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. Allegiance Bancshares is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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. Fortunately for readers, Allegiance Bancshares's earnings per share have been growing at 15% a year for the past five years.
Given that Allegiance Bancshares has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Is Allegiance Bancshares worth buying for its dividend? Companies like Allegiance Bancshares 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. We think this is a pretty attractive combination, and would be interested in investigating Allegiance Bancshares more closely.