Financial Institutions, Inc. (NASDAQ:FISI) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. 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. Therefore, if you purchase Financial Institutions’ shares on or after the 16th of September, you won’t be eligible to receive the dividend, when it is paid on the 4th of October.
The company’s next dividend payment will be US$0.27 per share, and in the last 12 months, the company paid a total of US$1.08 per share. Calculating the last year’s worth of payments shows that Financial Institutions has a trailing yield of 3.7% on the current share price of $29.5. 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! That’s why we should always check whether the dividend payments appear sustainable, and if the company is 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. That’s why it’s good to see Financial Institutions paying out a modest 26% of its earnings.
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.
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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Financial Institutions’s earnings per share have been growing at 17% a year for the past five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Financial Institutions has lifted its dividend by approximately 10% 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.
The Bottom Line
From a dividend perspective, should investors buy or avoid Financial Institutions? Companies like Financial Institutions 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. Overall, Financial Institutions looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Financial Institutions has an appealing dividend, it’s worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Financial Institutions and you should be aware of it before buying any shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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