It looks like First Interstate BancSystem, Inc. (NASDAQ:FIBK) is about to go ex-dividend in the next four days. If you purchase the stock on or after the 5th of November, you won't be eligible to receive this dividend, when it is paid on the 16th of November.
First Interstate BancSystem's next dividend payment will be US$0.38 per share. Last year, in total, the company distributed US$1.52 to shareholders. Last year's total dividend payments show that First Interstate BancSystem has a trailing yield of 4.3% on the current share price of $35.3. If you buy this business for its dividend, you should have an idea of whether First Interstate BancSystem's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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 Interstate BancSystem paid out more than half (54%) of its earnings last year, which is a regular payout ratio for most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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. This is why it's a relief to see First Interstate BancSystem earnings per share are up 6.5% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. First Interstate BancSystem has delivered an average of 13% 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.
The Bottom Line
Is First Interstate BancSystem worth buying for its dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
Curious what other investors think of First Interstate BancSystem? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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