Auburn National Bancorporation, Inc. (NASDAQ:AUBN) stock is about to trade ex-dividend in four days. 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. Therefore, if you purchase Auburn National Bancorporation's shares on or after the 9th of September, you won't be eligible to receive the dividend, when it is paid on the 27th of September.
The company's upcoming dividend is US$0.26 a share, following on from the last 12 months, when the company distributed a total of US$1.04 per share to shareholders. Based on the last year's worth of payments, Auburn National Bancorporation has a trailing yield of 3.0% on the current stock price of $34.9999. 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 check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Auburn National Bancorporation's payout ratio is modest, at just 44% 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.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Auburn National Bancorporation's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Auburn National Bancorporation has delivered an average of 2.9% per year annual increase in its dividend, based on the past 10 years of dividend payments.
The Bottom Line
Is Auburn National Bancorporation an attractive dividend stock, or better left on the shelf? Earnings per share have been flat in recent years, although Auburn National Bancorporation reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Auburn National Bancorporation appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Keen to explore more data on Auburn National Bancorporation's financial performance? Check out our visualisation of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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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