Should Income Investors Look At Bank7 Corp. (NASDAQ:BSVN) Before Its Ex-Dividend?

By
Simply Wall St
Published
September 24, 2020

Bank7 Corp. (NASDAQ:BSVN) is about to trade ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 29th of September will not receive this dividend, which will be paid on the 14th of October.

Bank7's next dividend payment will be US$0.10 per share, on the back of last year when the company paid a total of US$0.40 to shareholders. Looking at the last 12 months of distributions, Bank7 has a trailing yield of approximately 4.7% on its current stock price of $8.51. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Bank7

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. That's why it's good to see Bank7 paying out a modest 49% of its earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqGS:BSVN Historic Dividend September 24th 2020

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Bank7's earnings per share have dropped 19% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Given that Bank7 has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Should investors buy Bank7 for the upcoming dividend? Bank7's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. We're unconvinced on the company's merits, and think there might be better opportunities out there.

If you're not too concerned about Bank7's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To that end, you should learn about the 5 warning signs we've spotted with Bank7 (including 1 which doesn't sit too well with us).

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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