Is It Smart To Buy Heritage Financial Corporation (NASDAQ:HFWA) Before It Goes Ex-Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Heritage Financial Corporation (NASDAQ:HFWA) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Heritage Financial's shares on or after the 7th of February, you won't be eligible to receive the dividend, when it is paid on the 22nd of February.
The company's next dividend payment will be US$0.22 per share. Last year, in total, the company distributed US$0.88 to shareholders. Looking at the last 12 months of distributions, Heritage Financial has a trailing yield of approximately 3.0% on its current stock price of $29.02. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Heritage Financial can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Heritage Financial
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. Heritage Financial paid out a comfortable 36% of its profit last year.
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 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. 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 Heritage Financial's earnings per share have risen 11% 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. Heritage Financial has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Is Heritage Financial an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Heritage Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
On that note, you'll want to research what risks Heritage Financial is facing. Case in point: We've spotted 1 warning sign for Heritage Financial you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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