Should You Buy Emclaire Financial Corp (NASDAQ:EMCF) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Emclaire Financial Corp (NASDAQ:EMCF) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 26th of February to receive the dividend, which will be paid on the 19th of March.

Emclaire Financial's next dividend payment will be US$0.30 per share. Last year, in total, the company distributed US$1.20 to shareholders. Based on the last year's worth of payments, Emclaire Financial has a trailing yield of 4.5% on the current stock price of $26.695. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Emclaire Financial

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Emclaire Financial paying out a modest 50% of its earnings.

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 Emclaire Financial 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. With that in mind, we're encouraged by the steady growth at Emclaire Financial, with earnings per share up 3.3% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Emclaire Financial has delivered an average of 7.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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.

To Sum It Up

Has Emclaire Financial got what it takes to maintain its dividend payments? Emclaire Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Emclaire Financial 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 Emclaire Financial for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Emclaire Financial you should be aware of.

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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