Do These 3 Checks Before Buying Blue Ridge Bankshares, Inc. (NYSEMKT:BRBS) For Its Upcoming Dividend

Blue Ridge Bankshares, Inc. (NYSEMKT:BRBS) is about to trade ex-dividend in the next four days. Investors can purchase shares before the 23rd of July in order to be eligible for this dividend, which will be paid on the 31st of July.

Blue Ridge Bankshares's upcoming dividend is US$0.14 a share, following on from the last 12 months, when the company distributed a total of US$0.57 per share to shareholders. Based on the last year's worth of payments, Blue Ridge Bankshares stock has a trailing yield of around 3.7% on the current share price of $15.6. 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.

View our latest analysis for Blue Ridge Bankshares

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. Blue Ridge Bankshares paid out 65% of its earnings to investors last year, a normal payout level for most businesses. Blue Ridge Bankshares paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Blue Ridge Bankshares paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Blue Ridge Bankshares's 9.1% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Blue Ridge Bankshares has delivered 13% dividend growth per year on average over the past ten years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

Should investors buy Blue Ridge Bankshares for the upcoming dividend? We're not overly enthused to see Blue Ridge Bankshares's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Blue Ridge Bankshares. Our analysis shows 4 warning signs for Blue Ridge Bankshares that we strongly recommend you have a look at before investing in the company.

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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