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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Simmons First National Corporation (NASDAQ:SFNC) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Simmons First National's shares on or after the 14th of March will not receive the dividend, which will be paid on the 1st of April.
The company's next dividend payment will be US$0.2125 per share. Last year, in total, the company distributed US$0.85 to shareholders. Last year's total dividend payments show that Simmons First National has a trailing yield of 4.1% on the current share price of US$20.56. 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.
View our latest analysis for Simmons First National
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Simmons First National is paying out an acceptable 69% of its profit, a common payout level among 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?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Simmons First National's earnings per share have dropped 13% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Simmons First National has lifted its dividend by approximately 6.8% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.