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Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 22nd of July will not receive the dividend, which will be paid on the 13th of August.
Codorus Valley Bancorp's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$0.64 to shareholders. Looking at the last 12 months of distributions, Codorus Valley Bancorp has a trailing yield of approximately 2.8% on its current stock price of $22.98. 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 typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Codorus Valley Bancorp's payout ratio is modest, at just 29% of profit.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Codorus Valley Bancorp earnings per share are up 4.0% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Codorus Valley Bancorp has increased its dividend at approximately 6.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Codorus Valley Bancorp an attractive dividend stock, or better left on the shelf? 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. Codorus Valley Bancorp 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.
Curious about whether Codorus Valley Bancorp has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top 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 email@example.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.