Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that First Busey Corporation (NASDAQ:BUSE) is about to go ex-dividend in just 3 days. You will need to purchase shares before the 23rd of January to receive the dividend, which will be paid on the 31st of January.
First Busey's next dividend payment will be US$0.22 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, First Busey stock has a trailing yield of around 3.2% on the current share price of $27.37. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
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. That's why it's good to see First Busey paying out a modest 44% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see First Busey's earnings per share have risen 17% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. First Busey has seen its dividend decline 0.9% per annum on average over the past ten years, which is not great to see.
To Sum It Up
Has First Busey 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. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. First Busey 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.
Curious what other investors think of First Busey? 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.
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