Is It Smart To Buy Auburn National Bancorporation, Inc. (NASDAQ:AUBN) Before It Goes Ex-Dividend?

Readers hoping to buy Auburn National Bancorporation, Inc. (NASDAQ:AUBN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 9th of March will not receive this dividend, which will be paid on the 25th of March.

Auburn National Bancorporation’s upcoming dividend is US$0.26 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Looking at the last 12 months of distributions, Auburn National Bancorporation has a trailing yield of approximately 1.8% on its current stock price of $55.6. 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! We need to see whether the dividend is covered by earnings and if it’s growing.

See our latest analysis for Auburn National Bancorporation

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That’s why it’s good to see Auburn National Bancorporation paying out a modest 37% of its earnings.

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 Auburn National Bancorporation paid out over the last 12 months.

NasdaqGM:AUBN Historical Dividend Yield, March 4th 2020
NasdaqGM:AUBN Historical Dividend Yield, March 4th 2020

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it’s a relief to see Auburn National Bancorporation earnings per share are up 5.9% per annum 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. In the last ten years, Auburn National Bancorporation has lifted its dividend by approximately 2.8% 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.

Final Takeaway

Has Auburn National Bancorporation got what it takes to maintain its dividend payments? Auburn National Bancorporation 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. Auburn National Bancorporation 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.

So while Auburn National Bancorporation looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we’ve spotted 2 warning signs for Auburn National Bancorporation (of which 1 shouldn’t be ignored!) you should know about.

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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