The board of Bank of the James Financial Group, Inc. (NASDAQ:BOTJ) has announced that it will pay a dividend of US$0.07 per share on the 18th of June. This payment means the dividend yield will be 1.5%, which is below the average for the industry.
Bank of the James Financial Group's Payment Has Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Bank of the James Financial Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
If the trend of the last few years continues, EPS will grow by 6.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.
Bank of the James Financial Group Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The first annual payment during the last 7 years was US$0.20 in 2014, and the most recent fiscal year payment was US$0.28. This works out to be a compound annual growth rate (CAGR) of approximately 4.9% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
We Could See Bank of the James Financial Group's Dividend Growing
The company's investors will be pleased to have been receiving dividend income for some time. Bank of the James Financial Group has seen EPS rising for the last five years, at 6.3% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Our Thoughts On Bank of the James Financial Group's Dividend
Overall, we think Bank of the James Financial Group is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Bank of the James Financial Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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