There's A Lot To Like About Fidelity D & D Bancorp's (NASDAQ:FDBC) Upcoming US$0.46 Dividend

Readers hoping to buy Fidelity D & D Bancorp, Inc. (NASDAQ:FDBC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible 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. In other words, investors can purchase Fidelity D & D Bancorp's shares before the 13th of November in order to be eligible for the dividend, which will be paid on the 10th of December.

The company's upcoming dividend is US$0.46 a share, following on from the last 12 months, when the company distributed a total of US$1.72 per share to shareholders. Looking at the last 12 months of distributions, Fidelity D & D Bancorp has a trailing yield of approximately 2.5% on its current stock price of US$68.70. 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 Fidelity D & D Bancorp has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Fidelity D & D Bancorp paying out a modest 31% of its earnings.

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.

Check out our latest analysis for Fidelity D & D Bancorp

Click here to see how much of its profit Fidelity D & D Bancorp paid out over the last 12 months.

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. 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 Fidelity D & D Bancorp's earnings per share have risen 14% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Fidelity D & D Bancorp has increased its dividend at approximately 9.1% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Fidelity D & D Bancorp? 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 strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Fidelity D & D Bancorp more closely.

Want to learn more about Fidelity D & D Bancorp? Here's a visualisation of its historical rate of revenue and earnings growth.

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