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Should You Buy Evans Bancorp, Inc. (NYSEMKT:EVBN) For Its Upcoming Dividend In 4 Days?

Simply Wall St

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Evans Bancorp, Inc. (NYSEMKT:EVBN) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 10th of September in order to receive the dividend, which the company will pay on the 2nd of October.

Evans Bancorp's next dividend payment will be US$0.52 per share, and in the last 12 months, the company paid a total of US$1.04 per share. Last year's total dividend payments show that Evans Bancorp has a trailing yield of 3.1% on the current share price of $33.81. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Evans Bancorp can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Evans Bancorp

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Evans Bancorp's payout ratio is modest, at just 27% of profit.

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.

AMEX:EVBN Historical Dividend Yield, September 5th 2019
AMEX:EVBN Historical Dividend Yield, September 5th 2019

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. Fortunately for readers, Evans Bancorp's earnings per share have been growing at 14% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Evans Bancorp has increased its dividend at approximately 2.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Evans Bancorp is keeping back more of its profits to grow the business.

To Sum It Up

Is Evans Bancorp an attractive dividend stock, or better left on the shelf? 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 strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Evans Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Ever wonder what the future holds for Evans Bancorp? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.