Emclaire Financial Corp's (NASDAQ:EMCF) investors are due to receive a payment of US$0.30 per share on 18th of June. The dividend yield will be 4.5% based on this payment which is still above the industry average.
Emclaire Financial's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Emclaire Financial's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share could rise by 6.9% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.
Emclaire Financial Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from US$0.56 in 2011 to the most recent annual payment of US$1.20. This means that it has been growing its distributions at 7.9% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Emclaire Financial Could Grow Its Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Emclaire Financial has been growing its earnings per share at 6.9% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Emclaire Financial Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Emclaire Financial that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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