Consider This Before Buying Two River Bancorp (NASDAQ:TRCB) For The 1.3% Dividend
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Two River Bancorp (NASDAQ:TRCB) has paid dividends to shareholders, and these days it yields 1.3%. Does Two River Bancorp tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Two River Bancorp
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How well does Two River Bancorp fit our criteria?
The company currently pays out 19% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Two River Bancorp as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Two River Bancorp produces a yield of 1.3%, which is on the low-side for Banks stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Two River Bancorp for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three fundamental aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for TRCB’s future growth? Take a look at our free research report of analyst consensus for TRCB’s outlook.
Valuation: What is TRCB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TRCB is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
