Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Summit State Bank (NASDAQ:SSBI) is about to trade ex-dividend in the next two days. You can purchase shares before the 12th of November in order to receive the dividend, which the company will pay on the 20th of November.
Summit State Bank’s next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.48 to shareholders. Last year’s total dividend payments show that Summit State Bank has a trailing yield of 3.6% on the current share price of $13.25. 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.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Summit State Bank paid out a comfortable 31% of its profit last year.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
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. For this reason, we’re glad to see Summit State Bank’s earnings per share have risen 12% per annum over the last five years.
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, Summit State Bank has lifted its dividend by approximately 5.2% a year on average. It’s good to see both earnings and the dividend have improved – although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
Is Summit State Bank worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it’s usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. Summit State Bank ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
In light of that, while Summit State Bank has an appealing dividend, it’s worth knowing the risks involved with this stock. Every company has risks, and we’ve spotted 2 warning signs for Summit State Bank you should know about.
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. 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.