Sandy Spring Bancorp, Inc. (NASDAQ:SASR) stock is about to trade ex-dividend in four days. Ex-dividend means that investors that purchase the stock on or after the 9th of November will not receive this dividend, which will be paid on the 18th of November.
Sandy Spring Bancorp’s next dividend payment will be US$0.30 per share, and in the last 12 months, the company paid a total of US$1.20 per share. Based on the last year’s worth of payments, Sandy Spring Bancorp stock has a trailing yield of around 4.5% on the current share price of $26.53. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Sandy Spring Bancorp has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Sandy Spring Bancorp paid out 72% of its earnings to investors last year, a normal payout level for most businesses.
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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we’re not enthused to see that Sandy Spring Bancorp’s earnings per share have remained effectively flat over the past five years. It’s better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Sandy Spring Bancorp has increased its dividend at approximately 41% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid Sandy Spring Bancorp? Sandy Spring Bancorp’s earnings are effectively flat over recent years, even as the company pays out more than half of its earnings to shareholders as dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn’t look like a clear opportunity right now.
So if you want to do more digging on Sandy Spring Bancorp, you’ll find it worthwhile knowing the risks that this stock faces. To help with this, we’ve discovered 3 warning signs for Sandy Spring Bancorp that you should be aware of before investing in their shares.
If you’re in the market for dividend stocks, we recommend checking our list of top 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.