Should You Buy ChoiceOne Financial Services, Inc. (NASDAQ:COFS) For Its Upcoming Dividend?

ChoiceOne Financial Services, Inc. (NASDAQ:COFS) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 14th of December will not receive the dividend, which will be paid on the 31st of December.

ChoiceOne Financial Services's next dividend payment will be US$0.22 per share. Last year, in total, the company distributed US$0.80 to shareholders. Based on the last year's worth of payments, ChoiceOne Financial Services has a trailing yield of 2.9% on the current stock price of $30. 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 investigate whether ChoiceOne Financial Services can afford its dividend, and if the dividend could grow.

View our latest analysis for ChoiceOne Financial Services

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. ChoiceOne Financial Services paid out a comfortable 41% of its profit last year.

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

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see ChoiceOne Financial Services earnings per share are up 4.7% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. ChoiceOne Financial Services has delivered an average of 7.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has ChoiceOne Financial Services got what it takes to maintain its dividend payments? 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. We think this is a pretty attractive combination, and would be interested in investigating ChoiceOne Financial Services more closely.

So while ChoiceOne Financial Services looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 2 warning signs we've spotted with ChoiceOne Financial Services (including 1 which shouldn't be ignored).

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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