Four Days Left To Buy Village Bank and Trust Financial Corp. (NASDAQ:VBFC) Before The Ex-Dividend Date

Village Bank and Trust Financial Corp. (NASDAQ:VBFC) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Village Bank and Trust Financial's shares on or after the 3rd of June will not receive the dividend, which will be paid on the 10th of June.

The company's next dividend payment will be US$0.18 per share. Last year, in total, the company distributed US$0.72 to shareholders. Based on the last year's worth of payments, Village Bank and Trust Financial has a trailing yield of 1.6% on the current stock price of US$44.25. If you buy this business for its dividend, you should have an idea of whether Village Bank and Trust Financial's dividend is reliable and sustainable. As a result, readers should always check whether Village Bank and Trust Financial has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Village Bank and Trust 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. Fortunately Village Bank and Trust Financial's payout ratio is modest, at just 46% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Village Bank and Trust Financial paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Village Bank and Trust Financial's earnings per share have dropped 6.8% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Village Bank and Trust Financial has delivered 8.7% dividend growth per year on average over the past three years.

To Sum It Up

Is Village Bank and Trust Financial worth buying for its dividend? Village Bank and Trust Financial's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. We're unconvinced on the company's merits, and think there might be better opportunities out there.

However if you're still interested in Village Bank and Trust Financial as a potential investment, you should definitely consider some of the risks involved with Village Bank and Trust Financial. Case in point: We've spotted 3 warning signs for Village Bank and Trust Financial you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.