Be Sure To Check Out Provident Bancorp, Inc. (NASDAQ:PVBC) Before It Goes Ex-Dividend

By
Simply Wall St
Published
August 06, 2021
NasdaqCM:PVBC
Source: Shutterstock

It looks like Provident Bancorp, Inc. (NASDAQ:PVBC) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Provident Bancorp's shares before the 12th of August to receive the dividend, which will be paid on the 27th of August.

The company's next dividend payment will be US$0.04 per share, on the back of last year when the company paid a total of US$0.16 to shareholders. Based on the last year's worth of payments, Provident Bancorp stock has a trailing yield of around 1.0% on the current share price of $16.19. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Provident Bancorp

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. Provident Bancorp is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

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 Provident Bancorp paid out over the last 12 months.

historic-dividend
NasdaqCM:PVBC Historic Dividend August 7th 2021

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. Fortunately for readers, Provident Bancorp's earnings per share have been growing at 16% a year for the past five years.

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

The Bottom Line

Should investors buy Provident Bancorp for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Provident Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Want to learn more about Provident Bancorp's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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