Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Fauquier Bankshares, Inc. (NASDAQ:FBSS) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 12th of December to receive the dividend, which will be paid on the 2nd of January.
Fauquier Bankshares’s upcoming dividend is US$0.13 a share, following on from the last 12 months, when the company distributed a total of US$0.48 per share to shareholders. Last year’s total dividend payments show that Fauquier Bankshares has a trailing yield of 2.4% on the current share price of $20.61. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Fauquier 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. Fortunately Fauquier Bankshares’s payout ratio is modest, at just 27% of profit.
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.
Click here to see how much of its profit Fauquier Bankshares paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we’re encouraged by the steady growth at Fauquier Bankshares, with earnings per share up 9.1% on average over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Fauquier Bankshares has seen its dividend decline 4.6% per annum on average over the past ten years, which is not great to see. It’s unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We’d hope it’s because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
Is Fauquier Bankshares worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Fauquier Bankshares appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
Keen to explore more data on Fauquier Bankshares’s financial performance? Check out our visualisation 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
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