Village Bank and Trust Financial's (NASDAQ:VBFC) Shareholders Will Receive A Bigger Dividend Than Last Year

Village Bank and Trust Financial Corp.'s (NASDAQ:VBFC) periodic dividend will be increasing on the 1st of December to $0.18, with investors receiving 13% more than last year's $0.16. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.

See our latest analysis for Village Bank and Trust Financial

Village Bank and Trust Financial's Dividend Forecasted To Be Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Village Bank and Trust Financial has a short history of paying out dividends, with its current track record at only 2 years. Based on Village Bank and Trust Financial's last earnings report, calculating for its payout ratio equates to 40%, which means that the company covered its last dividend with comfortable room to spare.

Looking forward, earnings per share could rise by 18.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the future payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

Village Bank and Trust Financial Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the annual payment back then was $0.56, compared to the most recent full-year payment of $0.64. This means that it has been growing its distributions at 6.9% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Village Bank and Trust Financial to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Village Bank and Trust Financial has grown earnings per share at 19% per 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.

We Really Like Village Bank and Trust Financial's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Village Bank and Trust Financial that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated 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.