Fauquier Bankshares, Inc. (NASDAQ:FBSS) stock is about to trade ex-dividend in 4 days. If you purchase the stock on or after the 17th of September, you won’t be eligible to receive this dividend, when it is paid on the 1st of October.
Fauquier Bankshares’s next dividend payment will be US$0.13 per share, and in the last 12 months, the company paid a total of US$0.50 per share. Based on the last year’s worth of payments, Fauquier Bankshares has a trailing yield of 3.3% on the current stock price of $15.13. If you buy this business for its dividend, you should have an idea of whether Fauquier Bankshares’s dividend is reliable and sustainable. So we need to investigate whether Fauquier Bankshares can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. That’s why it’s good to see Fauquier Bankshares paying out a modest 28% of its earnings.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it’s a relief to see Fauquier Bankshares earnings per share are up 6.2% per annum over the last five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Fauquier Bankshares’s dividend payments per share have declined at 4.6% per year on average over the past 10 years, which is uninspiring. Fauquier Bankshares is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It’s unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
From a dividend perspective, should investors buy or avoid Fauquier Bankshares? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Fauquier Bankshares 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.
On that note, you’ll want to research what risks Fauquier Bankshares is facing. Our analysis shows 1 warning sign for Fauquier Bankshares and you should be aware of it before buying any shares.
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.
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This article by Simply Wall St is general in nature. 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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