Bank7 Corp. (NASDAQ:BSVN) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 27th of December in order to receive the dividend, which the company will pay on the 13th of January.
Bank7's next dividend payment will be US$0.50 per share, which looks like a nice increase on last year, when the company distributed a total of US$0.40 to shareholders. If you buy this business for its dividend, you should have an idea of whether Bank7's dividend is reliable and sustainable. So we need to investigate whether Bank7 can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bank7 is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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.
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 Bank7's earnings per share have dropped 17% a year over the past three years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
This is Bank7's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
Has Bank7 got what it takes to maintain its dividend payments? Bank7's earnings per share are down over the past three years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
Curious what other investors think of Bank7? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.
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