Be Sure To Check Out Prosperity Bancshares, Inc. (NYSE:PB) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Prosperity Bancshares, Inc. (NYSE:PB) is about to trade ex-dividend in the next 4 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Prosperity Bancshares' shares before the 15th of December in order to be eligible for the dividend, which will be paid on the 2nd of January.

The company's next dividend payment will be US$0.60 per share, and in the last 12 months, the company paid a total of US$2.32 per share. Based on the last year's worth of payments, Prosperity Bancshares stock has a trailing yield of around 3.3% on the current share price of US$70.24. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Prosperity Bancshares paid out a comfortable 41% of its profit last year.

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.

See our latest analysis for Prosperity Bancshares

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Prosperity Bancshares, with earnings per share up 4.4% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Prosperity Bancshares has delivered 7.8% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Prosperity Bancshares an attractive dividend stock, or better left on the shelf? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Prosperity Bancshares more closely.

While it's tempting to invest in Prosperity Bancshares for the dividends alone, you should always be mindful of the risks involved. For example - Prosperity Bancshares has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.