Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Esquire Financial Holdings, Inc. (NASDAQ:ESQ) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, Esquire Financial Holdings investors that purchase the stock on or after the 14th of February will not receive the dividend, which will be paid on the 1st of March.
The company'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$0.50 to shareholders. Looking at the last 12 months of distributions, Esquire Financial Holdings has a trailing yield of approximately 1.3% on its current stock price of US$47.27. If you buy this business for its dividend, you should have an idea of whether Esquire Financial Holdings's dividend is reliable and sustainable. So we need to investigate whether Esquire Financial Holdings 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. Esquire Financial Holdings paid out just 8.9% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Esquire Financial Holdings has grown its earnings rapidly, up 35% 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. In the last two years, Esquire Financial Holdings has lifted its dividend by approximately 29% 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.
Final Takeaway
Should investors buy Esquire Financial Holdings 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. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Esquire Financial Holdings 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.
While it's tempting to invest in Esquire Financial Holdings for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Esquire Financial Holdings that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.