Bank of Commerce Holdings (NASDAQ:BOCH) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 30th of September will not receive this dividend, which will be paid on the 11th of October.
Bank of Commerce Holdings's upcoming dividend is US$0.05 a share, following on from the last 12 months, when the company distributed a total of US$0.2 per share to shareholders. Looking at the last 12 months of distributions, Bank of Commerce Holdings has a trailing yield of approximately 1.9% on its current stock price of $10.73. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bank of Commerce Holdings paid out just 20% 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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Bank of Commerce Holdings's earnings per share have been growing at 11% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bank of Commerce Holdings has seen its dividend decline 4.6% per annum on average over the past ten years, which is not great to see. Bank of Commerce Holdings is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
Should investors buy Bank of Commerce Holdings for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. 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.
Ever wonder what the future holds for Bank of Commerce Holdings? See what the two analysts we track 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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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.