Sierra Bancorp (NASDAQ:BSRR) is about to trade ex-dividend in the next three days. Investors can purchase shares before the 28th of April in order to be eligible for this dividend, which will be paid on the 12th of May.
Sierra Bancorp’s next dividend payment will be US$0.21 per share, on the back of last year when the company paid a total of US$0.84 to shareholders. Based on the last year’s worth of payments, Sierra Bancorp stock has a trailing yield of around 3.0% on the current share price of $27.95. If you buy this business for its dividend, you should have an idea of whether Sierra Bancorp’s dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Fortunately Sierra Bancorp’s payout ratio is modest, at just 32% of profit.
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.
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 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, Sierra Bancorp’s earnings per share have been growing at 14% a year for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Sierra Bancorp has lifted its dividend by approximately 13% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Sierra Bancorp worth buying for its dividend? Companies like Sierra 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. We think this is a pretty attractive combination, and would be interested in investigating Sierra Bancorp more closely.
While it’s tempting to invest in Sierra Bancorp for the dividends alone, you should always be mindful of the risks involved. To help with this, we’ve discovered 1 warning sign for Sierra Bancorp that you should be aware of before investing in their shares.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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