Yahoo Finance Dividend Investors: Don't Be Too Quick To Buy Simmons First National Corporation (NASDAQ:SFNC) For Its Upcoming Dividend
Simmons First National Corporation (NASDAQ:SFNC) stock is about to trade ex-dividend in four days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Simmons First National's shares on or after the 14th of June will not receive the dividend, which will be paid on the 1st of July.
The company's next dividend payment will be US$0.21 per share, on the back of last year when the company paid a total of US$0.84 to shareholders. Based on the last year's worth of payments, Simmons First National has a trailing yield of 5.0% on the current stock price of US$16.74. If you buy this business for its dividend, you should have an idea of whether Simmons First National's dividend is reliable and sustainable. So we need to investigate whether Simmons First National can afford its dividend, and if the dividend could grow.
View our latest analysis for Simmons First National
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Simmons First National paid out 61% of its earnings to investors last year, a normal payout level for most businesses.
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 falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Simmons First National's 11% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Simmons First National has delivered an average of 7.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
Final Takeaway
Has Simmons First National got what it takes to maintain its dividend payments? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
Although, if you're still interested in Simmons First National and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 1 warning sign for Simmons First National 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.
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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.
