ChoiceOne Financial Services, Inc. (NASDAQ:COFS) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

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 ChoiceOne Financial Services, Inc. (NASDAQ:COFS) is about to go ex-dividend in just four days. This means that investors who purchase shares on or after the 12th of March will not receive the dividend, which will be paid on the 31st of March.

ChoiceOne Financial Services's next dividend payment will be US$0.22 per share. Last year, in total, the company distributed US$0.88 to shareholders. Last year's total dividend payments show that ChoiceOne Financial Services has a trailing yield of 3.2% on the current share price of $27.37. 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.

View our latest analysis for ChoiceOne Financial Services

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ChoiceOne Financial Services paid out a comfortable 39% of its profit last year.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit ChoiceOne Financial Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at ChoiceOne Financial Services, with earnings per share up 5.6% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, ChoiceOne Financial Services has increased its dividend at approximately 7.3% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy ChoiceOne Financial Services for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, ChoiceOne Financial Services looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in ChoiceOne Financial Services for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for ChoiceOne Financial Services and you should be aware of it before buying any shares.

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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