Readers hoping to buy Community Bank System, Inc. (NYSE:CBU) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 14th of September to receive the dividend, which will be paid on the 9th of October.
Community Bank System’s upcoming dividend is US$0.42 a share, following on from the last 12 months, when the company distributed a total of US$1.64 per share to shareholders. Based on the last year’s worth of payments, Community Bank System has a trailing yield of 2.8% on the current stock price of $59.85. If you buy this business for its dividend, you should have an idea of whether Community Bank System’s dividend is reliable and sustainable. 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. Community Bank System is paying out an acceptable 54% of its profit, a common payout level among most companies.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we’re encouraged by the steady growth at Community Bank System, with earnings per share up 6.1% on average 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. Community Bank System has delivered 6.7% dividend growth per year on average over the past 10 years. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Is Community Bank System an attractive dividend stock, or better left on the shelf? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we’re on the fence about its dividend prospects.
If you’re not too concerned about Community Bank System’s ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we’ve discovered 1 warning sign for Community Bank System that you should be aware of before investing in their shares.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting 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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