Independent Bank Corp. (NASDAQ:INDB) is about to trade ex-dividend in the next two 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Independent Bank's shares on or after the 31st of March will not receive the dividend, which will be paid on the 7th of April.

The company's next dividend payment will be US$0.59 per share, on the back of last year when the company paid a total of US$2.28 to shareholders. Calculating the last year's worth of payments shows that Independent Bank has a trailing yield of 3.5% on the current share price of US$64.70. If you buy this business for its dividend, you should have an idea of whether Independent Bank's dividend is reliable and sustainable. As a result, readers should always check whether Independent Bank has been able to grow its dividends, or if the dividend might be cut.

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. Independent Bank paid out 50% of its earnings to investors last year, a normal payout level for most businesses.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Check out our latest analysis for Independent Bank

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Independent Bank's earnings are down 2.2% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Independent Bank has delivered 9.0% dividend growth per year on average over the past 10 years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

Final Takeaway

Should investors buy Independent Bank for the upcoming dividend? We're not overly enthused to see Independent Bank's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Independent Bank doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Curious what other investors think of Independent Bank? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.