Readers hoping to buy Evans Bancorp, Inc. (NYSEMKT:EVBN) 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 6th of October.
Evans Bancorp’s next dividend payment will be US$0.58 per share. Last year, in total, the company distributed US$1.16 to shareholders. Last year’s total dividend payments show that Evans Bancorp has a trailing yield of 5.1% on the current share price of $22.9. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Evans Bancorp paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies.
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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s not encouraging to see that Evans Bancorp’s earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Evans Bancorp has increased its dividend at approximately 6.6% a year on average.
Has Evans Bancorp got what it takes to maintain its dividend payments? Evans Bancorp’s earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. This is not an overtly appealing combination of characteristics, and we’re just not that interested in this company’s dividend.
With that in mind though, if the poor dividend characteristics of Evans Bancorp don’t faze you, it’s worth being mindful of the risks involved with this business. To help with this, we’ve discovered 3 warning signs for Evans Bancorp that you should be aware of before investing in their shares.
If you’re in the market for dividend stocks, we recommend checking our list of top 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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