Readers hoping to buy Colony Bankcorp, Inc. (NASDAQ:CBAN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 30th of July in order to receive the dividend, which the company will pay on the 15th of August.
Colony Bankcorp's next dividend payment will be US$0.075 per share, and in the last 12 months, the company paid a total of US$0.30 per share. Last year's total dividend payments show that Colony Bankcorp has a trailing yield of 1.8% on the current share price of $16.3. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Colony Bankcorp can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Colony Bankcorp has a low and conservative payout ratio of just 20% of its income after tax.
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?
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. That's why it's comforting to see Colony Bankcorp's earnings have been skyrocketing, up 27% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Colony Bankcorp's dividend payments per share have declined at 2.6% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
Is Colony Bankcorp worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating Colony Bankcorp more closely.
Want to learn more about Colony Bankcorp? Here's a visualisation of its historical rate of 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.
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