Veritex Holdings, Inc. (NASDAQ:VBTX) stock is about to trade ex-dividend in 3 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. 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 Veritex Holdings' shares on or after the 4th of August will not receive the dividend, which will be paid on the 19th of August.
The company's next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$0.80 to shareholders. Last year's total dividend payments show that Veritex Holdings has a trailing yield of 2.4% on the current share price of $33.55. If you buy this business for its dividend, you should have an idea of whether Veritex Holdings's dividend is reliable and sustainable. So we need to investigate whether Veritex Holdings can afford its dividend, and if the dividend could grow.
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. Veritex Holdings paid out a comfortable 33% of its profit last year.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Veritex Holdings has grown its earnings rapidly, up 20% a year 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. Veritex Holdings has delivered 17% dividend growth per year on average over the past three years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Has Veritex Holdings got what it takes to maintain its dividend payments? Companies like Veritex Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Veritex Holdings looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in Veritex Holdings for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Veritex Holdings and you should be aware of them before buying any shares.
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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