Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see BCB Bancorp, Inc. (NASDAQ:BCBP) is about to trade ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 5th of November will not receive this dividend, which will be paid on the 20th of November.
BCB Bancorp's next dividend payment will be US$0.14 per share, on the back of last year when the company paid a total of US$0.56 to shareholders. Calculating the last year's worth of payments shows that BCB Bancorp has a trailing yield of 6.2% on the current share price of $9.09. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. BCB Bancorp paid out 55% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. With that in mind, we're encouraged by the steady growth at BCB Bancorp, with earnings per share up 4.6% on average over the last five years.
We'd also point out that BCB Bancorp issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. BCB Bancorp has delivered 1.6% dividend growth per year on average over the past 10 years.
The Bottom Line
Should investors buy BCB Bancorp for the upcoming dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.
However if you're still interested in BCB Bancorp as a potential investment, you should definitely consider some of the risks involved with BCB Bancorp. For example, BCB Bancorp has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top 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.
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