Central Valley Community Bancorp (NASDAQ:CVCY) is about to trade ex-dividend in the next four 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 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. Thus, you can purchase Central Valley Community Bancorp’s shares before the 4th of November in order to receive the dividend, which the company will pay on the 19th of November.
The company’s upcoming dividend is US$0.12 a share, following on from the last 12 months, when the company distributed a total of US$0.48 per share to shareholders. Looking at the last 12 months of distributions, Central Valley Community Bancorp has a trailing yield of approximately 2.3% on its current stock price of $21.33. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it’s growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Central Valley Community Bancorp is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we’re glad to see Central Valley Community Bancorp’s earnings per share have risen 19% per annum over the last five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Central Valley Community Bancorp has delivered an average of 10% per year annual increase in its dividend, based on the past nine years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Should investors buy Central Valley Community Bancorp for the upcoming dividend? 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 strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. Overall, Central Valley Community Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while Central Valley Community Bancorp looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 2 warning signs we’ve spotted with Central Valley Community Bancorp (including 1 which is concerning).
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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