Greene County Bancorp, Inc. (NASDAQ:GCBC) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 14th of August, you won’t be eligible to receive this dividend, when it is paid on the 30th of August.
Greene County Bancorp’s next dividend payment will be US$0.11 per share. Last year, in total, the company distributed US$0.44 to shareholders. Calculating the last year’s worth of payments shows that Greene County Bancorp has a trailing yield of 1.6% on the current share price of $26.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Greene County Bancorp is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It’s encouraging to see Greene County Bancorp has grown its earnings rapidly, up 21% a year for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Greene County Bancorp has increased its dividend at approximately 2.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Greene County Bancorp is keeping back more of its profits to grow the business.
From a dividend perspective, should investors buy or avoid Greene County Bancorp? 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. Overall, Greene County Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious about whether Greene County Bancorp has been able to consistently generate growth? Here’s a chart of its historical revenue and earnings growth.
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.