Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see U.S. Bancorp (NYSE:USB) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a 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. This means that investors who purchase U.S. Bancorp’s shares on or after the 28th of September will not receive the dividend, which will be paid on the 16th of October.
The company’s next dividend payment will be US$0.48 per share, on the back of last year when the company paid a total of US$1.92 to shareholders. Based on the last year’s worth of payments, U.S. Bancorp stock has a trailing yield of around 5.8% on the current share price of $33.38. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether U.S. Bancorp has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for U.S. Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. U.S. Bancorp paid out 53% of its earnings to investors last year, a normal payout level for most businesses.
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.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It’s not encouraging to see that U.S. Bancorp’s earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. U.S. Bancorp has delivered 9.4% dividend growth per year on average over the past 10 years.
To Sum It Up
Is U.S. Bancorp worth buying for its dividend? U.S. Bancorp’s earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. U.S. Bancorp doesn’t appear to have a lot going for it, and we’re not inclined to take a risk on owning it for the dividend.
Having said that, if you’re looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with U.S. Bancorp. Our analysis shows 2 warning signs for U.S. Bancorp and you should be aware of these before buying any shares.
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.
Source: finance.yahoo.com
