Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see FB Financial Corporation (NYSE:FBK) is about to trade ex-dividend in the next four 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. 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, FB Financial investors that purchase the stock on or after the 6th of August will not receive the dividend, which will be paid on the 20th of August.

The company's next dividend payment will be US$0.17 per share. Last year, in total, the company distributed US$0.68 to shareholders. Last year's total dividend payments show that FB Financial has a trailing yield of 1.5% on the current share price of US$46.69. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether FB Financial has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for FB Financial

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. FB Financial paid out just 12% 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?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that FB Financial's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last six years, FB Financial has lifted its dividend by approximately 19% a year on average.

The Bottom Line

Should investors buy FB Financial for the upcoming dividend? FB Financial's earnings per share are basically flat over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

However if you're still interested in FB Financial as a potential investment, you should definitely consider some of the risks involved with FB Financial. For example - FB Financial has 1 warning sign we think 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.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com