The Community Financial Corporation (NASDAQ:TCFC) stock is about to trade ex-dividend in 4 days time. This means that investors who purchase shares on or after the 4th of October will not receive the dividend, which will be paid on the 21st of October.
Community Financial's next dividend payment will be US$0.1 per share, on the back of last year when the company paid a total of US$0.5 to shareholders. Calculating the last year's worth of payments shows that Community Financial has a trailing yield of 1.5% on the current share price of $33.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Community Financial has a low and conservative payout ratio of just 17% 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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Community Financial earnings per share are up 7.6% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Community Financial has delivered an average of 2.3% per year annual increase in its dividend, based on the past ten years of dividend payments. 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
From a dividend perspective, should investors buy or avoid Community Financial? Community Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Community Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious what other investors think of Community Financial? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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 firstname.lastname@example.org. 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.