NYSE:RF) is about to trade ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 3rd of September will not receive this dividend, which will be paid on the 1st of October.” data-reactid=”28″ type=”text”>Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Regions Financial Corporation (NYSE:RF) is about to trade ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 3rd of September will not receive this dividend, which will be paid on the 1st of October.
Regions Financial’s next dividend payment will be US$0.15 per share, on the back of last year when the company paid a total of US$0.62 to shareholders. Last year’s total dividend payments show that Regions Financial has a trailing yield of 5.3% on the current share price of $11.71. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Last year Regions Financial paid out 92% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
Generally, the higher a company’s payout ratio, the more the dividend is at risk of being reduced.
here to see the company’s payout ratio, plus analyst estimates of its future dividends.” data-reactid=”37″ type=”text”>Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. So we’re not too excited that Regions Financial’s earnings are down 3.0% a year over the past five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Regions Financial has lifted its dividend by approximately 32% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Regions Financial is already paying out 92% of its profits, and with shrinking earnings we think it’s unlikely that this dividend will grow quickly in the future.
The Bottom Line
Is Regions Financial an attractive dividend stock, or better left on the shelf? Not only are earnings per share shrinking, but Regions Financial is paying out a disconcertingly high percentage of its profit as dividends. It’s not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we’re not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
2 warning signs for Regions Financial that we recommend you consider before investing in the business.” data-reactid=”55″ type=”text”>With that in mind though, if the poor dividend characteristics of Regions Financial don’t faze you, it’s worth being mindful of the risks involved with this business. For example, we’ve found 2 warning signs for Regions Financial that we recommend you consider before investing in the business.
a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.” data-reactid=”56″ type=”text”>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.