Readers hoping to buy First Mid Bancshares, Inc. (NASDAQ:FMBH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Accordingly, First Mid Bancshares investors that purchase the stock on or after the 14th of May will not receive the dividend, which will be paid on the 31st of May.
The company's upcoming dividend is US$0.23 a share, following on from the last 12 months, when the company distributed a total of US$0.92 per share to shareholders. Looking at the last 12 months of distributions, First Mid Bancshares has a trailing yield of approximately 2.8% on its current stock price of US$32.58. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether First Mid Bancshares can afford its dividend, and if the dividend could grow.
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. First Mid Bancshares paid out a comfortable 30% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at First Mid Bancshares, with earnings per share up 3.1% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, First Mid Bancshares has lifted its dividend by approximately 8.2% a year on average. 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
Should investors buy First Mid Bancshares for the upcoming dividend? First Mid Bancshares has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, First Mid Bancshares appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while First Mid Bancshares has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for First Mid Bancshares that we recommend you consider before investing in the business.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.