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 Foundation Inc. ( NASDAQ:FFWM ) is about to go ex-dividend in just 4 days. You will need to purchase shares before the 30th of August to receive the dividend, which will be paid on the 16th of September.
First Foundation's next dividend payment will be US$0.05 per share. Last year, in total, the company distributed US$0.20 to shareholders. Last year's total dividend payments show that First Foundation has a trailing yield of 1.4% on the current share price of $13.83. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. First Foundation has a low and conservative payout ratio of just 8.5% of its income after tax.
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?
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. For this reason, we're glad to see First Foundation's earnings per share have risen 17% per annum over the last five years.
Given that First Foundation has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Is First Foundation worth buying for its dividend? 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 is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, First Foundation appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Wondering what the future holds for First Foundation? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org . 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.