Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see First Midwest Bancorp, Inc. (NASDAQ:FMBI) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 24th of September will not receive this dividend, which will be paid on the 6th of October.
First Midwest Bancorp's next dividend payment will be US$0.14 per share, on the back of last year when the company paid a total of US$0.56 to shareholders. Based on the last year's worth of payments, First Midwest Bancorp has a trailing yield of 4.7% on the current stock price of $11.83. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether First Midwest Bancorp has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see First Midwest Bancorp paying out a modest 43% 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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see First Midwest Bancorp earnings per share are up 7.1% 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 Midwest Bancorp has delivered 30% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Is First Midwest Bancorp worth buying for its dividend? First Midwest Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, First Midwest Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
So while First Midwest Bancorp looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for First Midwest Bancorp that you should be aware of before investing in their shares.
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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