It looks like Emclaire Financial Corp (NASDAQ:EMCF) is about to go ex-dividend in the next 2 days. You will need to purchase shares before the 29th of May to receive the dividend, which will be paid on the 19th of June.
Emclaire Financial’s upcoming dividend is US$0.30 a share, following on from the last 12 months, when the company distributed a total of US$1.20 per share to shareholders. Last year’s total dividend payments show that Emclaire Financial has a trailing yield of 6.1% on the current share price of $19.58. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it’s 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. That’s why it’s good to see Emclaire Financial paying out a modest 46% of its earnings.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we’re encouraged by the steady growth at Emclaire Financial, with earnings per share up 2.9% on average over the last five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, ten years ago, Emclaire Financial has lifted its dividend by approximately 7.9% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy Emclaire Financial for the upcoming dividend? Emclaire Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Emclaire Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it’s tempting to invest in Emclaire Financial for the dividends alone, you should always be mindful of the risks involved. For example, we’ve found 2 warning signs for Emclaire Financial that we recommend you consider before investing in the business.
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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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. Thank you for reading.