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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Chemung Financial Corporation (NASDAQ:CHMG) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 18th of December in order to be eligible for this dividend, which will be paid on the 4th of January.
Chemung Financial's next dividend payment will be US$0.26 per share, and in the last 12 months, the company paid a total of US$1.04 per share. Calculating the last year's worth of payments shows that Chemung Financial has a trailing yield of 3.1% on the current share price of $33.65. 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 check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Chemung Financial paid out a comfortable 28% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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, Chemung Financial's earnings per share have been growing at 17% 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. Chemung Financial's dividend payments are broadly unchanged compared to where they were 10 years ago.
The Bottom Line
From a dividend perspective, should investors buy or avoid Chemung Financial? 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. In summary, Chemung Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Chemung Financial has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Chemung Financial and understanding them should be part of your investment process.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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