Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Bank7 Corp. (NASDAQ:BSVN) is about to go ex-dividend in just four days. You can purchase shares before the 21st of December in order to receive the dividend, which the company will pay on the 7th of January.
Bank7's next dividend payment will be US$0.11 per share, and in the last 12 months, the company paid a total of US$0.40 per share. Based on the last year's worth of payments, Bank7 stock has a trailing yield of around 3.5% on the current share price of $12.42. If you buy this business for its dividend, you should have an idea of whether Bank7's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. Bank7 paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Bank7's earnings per share have been shrinking at 3.0% a year over the previous five years.
Given that Bank7 has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Is Bank7 worth buying for its dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. It doesn't appear an outstanding opportunity, but could be worth a closer look.
So if you want to do more digging on Bank7, you'll find it worthwhile knowing the risks that this stock faces. To that end, you should learn about the 3 warning signs we've spotted with Bank7 (including 1 which is concerning).
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.
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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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