Should You Buy ConnectOne Bancorp, Inc. (NASDAQ:CNOB) For Its Dividend?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, ConnectOne Bancorp, Inc. (NASDAQ:CNOB) has paid dividends to shareholders, and these days it yields 1.7%. Does ConnectOne Bancorp tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for ConnectOne Bancorp
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is their annual yield among the top 25% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share risen in the past couple of years?
Does earnings amply cover its dividend payments?
Will it have the ability to keep paying its dividends going forward?
How does ConnectOne Bancorp fare?
ConnectOne Bancorp has a trailing twelve-month payout ratio of 18%, which means that the dividend is covered by earnings. However, going forward, analysts expect CNOB’s payout to fall to 12% of its earnings. Assuming a constant share price, this equates to a dividend yield of 1.7%. However, EPS should increase to $2.09, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. CNOB investors will be well aware the dividend payments are lower today than they were 10 years ago, although the payments have at least been steady. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
Relative to peers, ConnectOne Bancorp produces a yield of 1.7%, which is on the low-side for Banks stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank ConnectOne Bancorp as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for CNOB’s future growth? Take a look at our free research report of analyst consensus for CNOB’s outlook.
Valuation: What is CNOB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CNOB is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
