It looks like Paragon Banking Group PLC (LON:PAG) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Paragon Banking Group investors that purchase the stock on or after the 2nd of February will not receive the dividend, which will be paid on the 3rd of March.
The company's next dividend payment will be UK£0.19 per share, on the back of last year when the company paid a total of UK£0.29 to shareholders. Based on the last year's worth of payments, Paragon Banking Group stock has a trailing yield of around 4.8% on the current share price of £5.91. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Paragon Banking Group has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Paragon Banking Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Paragon Banking Group paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Paragon Banking Group has grown its earnings rapidly, up 26% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Paragon Banking Group has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
From a dividend perspective, should investors buy or avoid Paragon Banking Group? 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. We think this is a pretty attractive combination, and would be interested in investigating Paragon Banking Group more closely.
On that note, you'll want to research what risks Paragon Banking Group is facing. For example, Paragon Banking Group has 2 warning signs (and 1 which can't be ignored) we think you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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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