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. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase First Mid Bancshares' shares on or after the 16th of November will not receive the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be US$0.26 per share, and in the last 12 months, the company paid a total of US$1.04 per share. Last year's total dividend payments show that First Mid Bancshares has a trailing yield of 2.0% on the current share price of US$51.24. If you buy this business for its dividend, you should have an idea of whether First Mid Bancshares's dividend is reliable and sustainable. So we need to investigate whether First Mid Bancshares can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. First Mid Bancshares has a low and conservative payout ratio of just 23% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
View our latest analysis for First Mid Bancshares
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 9.0% on average 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. First Mid Bancshares has delivered an average of 6.0% 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.
Final Takeaway
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. First Mid Bancshares 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.
So while First Mid Bancshares looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for First Mid Bancshares you should know about.
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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