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Bank of Commerce Holdings (NASDAQ:BOCH) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 30th of March will not receive the dividend, which will be paid on the 9th of April.
Bank of Commerce Holdings's next dividend payment will be US$0.05 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Based on the last year's worth of payments, Bank of Commerce Holdings stock has a trailing yield of around 3.0% on the current share price of $6.75. If you buy this business for its dividend, you should have an idea of whether Bank of Commerce Holdings's dividend is reliable and sustainable. So we need to investigate whether Bank of Commerce Holdings can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Bank of Commerce Holdings paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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 in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Bank of Commerce Holdings's earnings per share have risen 15% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bank of Commerce Holdings's dividend payments per share have declined at 1.8% per year on average over the past ten years, which is uninspiring.
To Sum It Up
From a dividend perspective, should investors buy or avoid Bank of Commerce Holdings? Companies like Bank of Commerce Holdings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating Bank of Commerce Holdings more closely.
In light of that, while Bank of Commerce Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Bank of Commerce Holdings has 3 warning signs we think you should be aware of.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.