Should You Buy ChoiceOne Financial Services, Inc. (NASDAQ:COFS) For Its Upcoming Dividend?
Readers hoping to buy ChoiceOne Financial Services, Inc. (NASDAQ:COFS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. This means that investors who purchase ChoiceOne Financial Services' shares on or after the 14th of March will not receive the dividend, which will be paid on the 29th of March.
The company's next dividend payment will be US$0.27 per share, on the back of last year when the company paid a total of US$1.04 to shareholders. Based on the last year's worth of payments, ChoiceOne Financial Services has a trailing yield of 4.1% on the current stock price of US$26.30. If you buy this business for its dividend, you should have an idea of whether ChoiceOne Financial Services's dividend is reliable and sustainable. So we need to investigate whether ChoiceOne Financial Services can afford its dividend, and if the dividend could grow.
See our latest analysis for ChoiceOne Financial Services
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. ChoiceOne Financial Services paid out a comfortable 35% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit ChoiceOne Financial Services paid out over the last 12 months.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, ChoiceOne Financial Services's earnings per share have been growing at 12% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. ChoiceOne Financial Services has delivered 8.6% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Has ChoiceOne Financial Services got what it takes to maintain its dividend payments? 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. ChoiceOne Financial Services ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Want to learn more about ChoiceOne Financial Services's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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.
