Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Central Valley Community Bancorp (NASDAQ:CVCY) is about to go ex-dividend in just 3 days. You can purchase shares before the 1st of August in order to receive the dividend, which the company will pay on the 16th of August.
Central Valley Community Bancorp’s next dividend payment will be US$0.11 per share. Last year, in total, the company distributed US$0.44 to shareholders. Last year’s total dividend payments show that Central Valley Community Bancorp has a trailing yield of 2.1% on the current share price of $21.06. If you buy this business for its dividend, you should have an idea of whether Central Valley Community Bancorp’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. Central Valley Community Bancorp paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Central Valley Community Bancorp’s earnings per share have been growing at 16% a year for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Central Valley Community Bancorp has lifted its dividend by approximately 16% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is Central Valley Community Bancorp worth buying for its 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 is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Central Valley Community Bancorp 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.
Curious what other investors think of Central Valley Community Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.