Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bank of the James Financial Group, Inc. (NASDAQ:BOTJ) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 4th of March in order to be eligible for this dividend, which will be paid on the 19th of March.
Bank of the James Financial Group's next dividend payment will be US$0.07 per share, and in the last 12 months, the company paid a total of US$0.28 per share. Based on the last year's worth of payments, Bank of the James Financial Group has a trailing yield of 1.9% on the current stock price of $14.79. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Bank of the James Financial Group has a low and conservative payout ratio of just 24% of its income after tax.
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.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 not enthused to see that Bank of the James Financial Group's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bank of the James Financial Group has delivered an average of 4.9% per year annual increase in its dividend, based on the past seven years of dividend payments.
The Bottom Line
Should investors buy Bank of the James Financial Group for the upcoming dividend? Earnings per share have been flat in recent years, although Bank of the James Financial Group reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Bank of the James Financial Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
On that note, you'll want to research what risks Bank of the James Financial Group is facing. For example, we've found 2 warning signs for Bank of the James Financial Group that we recommend you consider before investing in the business.
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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