Is It Smart To Buy Business First Bancshares, Inc. (NASDAQ:BFST) Before It Goes Ex-Dividend?
Readers hoping to buy Business First Bancshares, Inc. (NASDAQ:BFST) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 13th of May in order to receive the dividend, which the company will pay on the 31st of May.
Business First Bancshares's next dividend payment will be US$0.12 per share, and in the last 12 months, the company paid a total of US$0.48 per share. Based on the last year's worth of payments, Business First Bancshares has a trailing yield of 2.0% on the current stock price of $24.28. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Business First Bancshares
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Business First Bancshares has a low and conservative payout ratio of just 22% of its income after tax.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Business First Bancshares's earnings have been skyrocketing, up 25% per annum 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. Business First Bancshares has delivered 14% dividend growth per year on average over the past three years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Has Business First Bancshares got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Business First Bancshares appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Business First Bancshares has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for Business First Bancshares (of which 1 is concerning!) you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top 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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