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. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Fidelity D & D Bancorp's shares on or after the 14th of August, you won't be eligible to receive the dividend, when it is paid on the 10th of September.

The company's upcoming dividend is US$0.43 a share, following on from the last 12 months, when the company distributed a total of US$1.72 per share to shareholders. Based on the last year's worth of payments, Fidelity D & D Bancorp has a trailing yield of 3.2% on the current stock price of US$54.52. If you buy this business for its dividend, you should have an idea of whether Fidelity D & D Bancorp's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fidelity D & D Bancorp paid out a comfortable 32% of its profit last year.

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.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Fidelity D & D Bancorp's earnings per share have risen 13% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Fidelity D & D Bancorp has lifted its dividend by 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.

Final Takeaway

Has Fidelity D & D Bancorp got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Fidelity D & D Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Want to learn more about Fidelity D & D Bancorp's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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

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.