Should You Buy Chemung Financial Corporation (NASDAQ:CHMG) For Its Upcoming Dividend?
Chemung Financial Corporation (NASDAQ:CHMG) is about to trade ex-dividend in the next 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Chemung Financial's shares on or after the 15th of March, you won't be eligible to receive the dividend, when it is paid on the 1st of April.
The company's next dividend payment will be US$0.31 per share, and in the last 12 months, the company paid a total of US$1.24 per share. Based on the last year's worth of payments, Chemung Financial stock has a trailing yield of around 2.9% on the current share price of US$42.40. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Chemung Financial has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Chemung Financial
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Chemung Financial is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Chemung Financial earnings per share are up 5.4% per annum over the last 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, Chemung Financial has lifted its dividend by approximately 1.8% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid Chemung Financial? It has been growing its earnings per share somewhat in recent years, although it 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, Chemung Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Wondering what the future holds for Chemung Financial? See what the three analysts we track 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.
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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.
