It looks like Southern Missouri Bancorp, Inc. (NASDAQ:SMBC) is about to go ex-dividend in the next 2 days. If you purchase the stock on or after the 12th of November, you won’t be eligible to receive this dividend, when it is paid on the 30th of November.
Southern Missouri Bancorp’s next dividend payment will be US$0.15 per share, on the back of last year when the company paid a total of US$0.60 to shareholders. Calculating the last year’s worth of payments shows that Southern Missouri Bancorp has a trailing yield of 2.3% on the current share price of $25.89. If you buy this business for its dividend, you should have an idea of whether Southern Missouri 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. Southern Missouri Bancorp has a low and conservative payout ratio of just 19% of its income after tax.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Southern Missouri Bancorp’s earnings per share have been growing at 12% 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. Southern Missouri Bancorp has delivered an average of 9.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Southern Missouri Bancorp worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the 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, Southern Missouri Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it’s tempting to invest in Southern Missouri Bancorp for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we’ve identified 1 warning sign with Southern Missouri Bancorp and understanding them should be part of your investment process.
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.