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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Blue Ridge Bankshares, Inc. (NYSEMKT:BRBS) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 23rd of July, you won't be eligible to receive this dividend, when it is paid on the 31st of July.
Blue Ridge Bankshares's next dividend payment will be US$0.14 per share, on the back of last year when the company paid a total of US$0.57 to shareholders. Looking at the last 12 months of distributions, Blue Ridge Bankshares has a trailing yield of approximately 3.7% on its current stock price of $15.6. 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! We need to see whether the dividend is covered by earnings and if it's 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. Blue Ridge Bankshares paid out more than half (65%) of its earnings last year, which is a regular payout ratio for most companies. Blue Ridge Bankshares paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Blue Ridge Bankshares's earnings per share have dropped 9.1% a year over the past five 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. Blue Ridge Bankshares has delivered an average of 13% per year annual increase in its dividend, based on the past ten years of dividend payments. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
Has Blue Ridge Bankshares got what it takes to maintain its dividend payments? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
With that in mind though, if the poor dividend characteristics of Blue Ridge Bankshares don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 4 warning signs for Blue Ridge Bankshares (1 is a bit concerning!) that deserve your attention before investing in the shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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