Do These 3 Checks Before Buying Community Bank System, Inc. (NYSE:CBU) For Its Upcoming Dividend
Readers hoping to buy Community Bank System, Inc. (NYSE:CBU) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Community Bank System investors that purchase the stock on or after the 14th of June will not receive the dividend, which will be paid on the 10th of July.
The company's upcoming dividend is US$0.44 a share, following on from the last 12 months, when the company distributed a total of US$1.76 per share to shareholders. Calculating the last year's worth of payments shows that Community Bank System has a trailing yield of 3.2% on the current share price of $54.32. 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! So we need to investigate whether Community Bank System can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Community Bank System
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. Community Bank System paid out 64% of its earnings to investors last year, a normal payout level for most businesses.
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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Community Bank System's earnings are down 2.4% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Community Bank System has lifted its dividend by approximately 5.0% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
Final Takeaway
Is Community Bank System worth buying for its dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
Curious what other investors think of Community Bank System? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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