Readers hoping to buy Sound Financial Bancorp, Inc. (NASDAQ:SFBC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. In other words, investors can purchase Sound Financial Bancorp's shares before the 9th of May in order to be eligible for the dividend, which will be paid on the 23rd of May.

The company's next dividend payment will be US$0.19 per share, and in the last 12 months, the company paid a total of US$0.76 per share. Based on the last year's worth of payments, Sound Financial Bancorp stock has a trailing yield of around 1.5% on the current share price of US$51.33. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. That's why it's good to see Sound Financial Bancorp paying out a modest 29% of its earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

View our latest analysis for Sound Financial Bancorp

Click here to see how much of its profit Sound Financial Bancorp paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Sound Financial Bancorp's earnings per share have fallen at approximately 5.8% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Sound Financial Bancorp has lifted its dividend by approximately 14% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Sound Financial Bancorp? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

With that being said, if dividends aren't your biggest concern with Sound Financial Bancorp, you should know about the other risks facing this business. For example, we've found 1 warning sign for Sound Financial Bancorp that we recommend you consider before investing in the business.

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.