Here's What We Like About Sound Financial Bancorp's (NASDAQ:SFBC) Upcoming Dividend
Sound Financial Bancorp, Inc. (NASDAQ:SFBC) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Sound Financial Bancorp's shares on or after the 8th of February, you won't be eligible to receive the dividend, when it is paid on the 23rd of February.
The company's next dividend payment will be US$0.17 per share, on the back of last year when the company paid a total of US$0.78 to shareholders. Calculating the last year's worth of payments shows that Sound Financial Bancorp has a trailing yield of 2.0% on the current share price of $39.8. If you buy this business for its dividend, you should have an idea of whether Sound Financial Bancorp's dividend is reliable and sustainable. So we need to investigate whether Sound Financial Bancorp can afford its dividend, and if the dividend could grow.
See our latest analysis for Sound Financial Bancorp
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. Sound Financial Bancorp is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit Sound Financial Bancorp paid out over the last 12 months.
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, Sound Financial Bancorp's earnings per share have been growing at 11% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Sound Financial Bancorp has lifted its dividend by approximately 15% 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
Should investors buy Sound Financial Bancorp for the upcoming 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 is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Sound Financial Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
On that note, you'll want to research what risks Sound Financial Bancorp is facing. To help with this, we've discovered 1 warning sign for Sound Financial Bancorp that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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