Community West Bancshares (NASDAQ:CWBC) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 12th of August will not receive the dividend, which will be paid on the 30th of August.
Community West Bancshares's next dividend payment will be US$0.055 per share, and in the last 12 months, the company paid a total of US$0.22 per share. Calculating the last year's worth of payments shows that Community West Bancshares has a trailing yield of 2.2% on the current share price of $9.92. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Community West Bancshares has been able to grow its dividends, or if the dividend might be cut.
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. Fortunately Community West Bancshares's payout ratio is modest, at just 25% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Community West Bancshares's earnings per share have fallen at approximately 6.5% a year over the previous 5 years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Community West Bancshares has delivered an average of 22% per year annual increase in its dividend, based on the past 5 years of dividend payments.
Is Community West Bancshares an attractive dividend stock, or better left on the shelf? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We think there are likely better opportunities out there.
Keen to explore more data on Community West Bancshares's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.
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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.