Be Sure To Check Out The Community Financial Corporation (NASDAQ:TCFC) Before It Goes Ex-Dividend

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 The Community Financial Corporation (NASDAQ:TCFC) is about to go ex-dividend in just 3 days. Ex-dividend means that investors that purchase the stock on or after the 8th of January will not receive this dividend, which will be paid on the 25th of January.

Community Financial's next dividend payment will be US$0.13 per share, and in the last 12 months, the company paid a total of US$0.50 per share. Calculating the last year's worth of payments shows that Community Financial has a trailing yield of 1.9% on the current share price of $26.48. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Community Financial has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Community Financial

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Community Financial paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

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 Community Financial paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Community Financial's earnings per share have risen 12% per annum over the last five years.

We'd also point out that Community Financial issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Community Financial has delivered an average of 2.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Community Financial is keeping back more of its profits to grow the business.

The Bottom Line

Should investors buy Community Financial 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. Overall, Community 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 Community Financial for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Community Financial you should know about.

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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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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