Readers hoping to buy First Business Financial Services, Inc. (NASDAQ:FBIZ) 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 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. Accordingly, First Business Financial Services investors that purchase the stock on or after the 12th of August will not receive the dividend, which will be paid on the 26th of August.

The company's next dividend payment will be US$0.34 per share. Last year, in total, the company distributed US$1.36 to shareholders. Last year's total dividend payments show that First Business Financial Services has a trailing yield of 1.9% on the current share price of US$71.12. If you buy this business for its dividend, you should have an idea of whether First Business Financial Services's dividend is reliable and sustainable. As a result, readers should always check whether First Business Financial Services has been able to grow its dividends, or if the dividend might be cut.

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. First Business Financial Services paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

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 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see First Business Financial Services's earnings have been skyrocketing, up 27% per annum for 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. In the past 10 years, First Business Financial Services has increased its dividend at approximately 12% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has First Business Financial Services got what it takes to maintain its dividend payments? 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 is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, First Business Financial Services looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Curious what other investors think of First Business Financial Services? 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.

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.