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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. County Bancorp, Inc. (NASDAQ:ICBK) has recently paid dividends to shareholders, and currently yields 1.1%. Let's dig deeper into whether County Bancorp should have a place in your portfolio.
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
Does County Bancorp pass our checks?
The current trailing twelve-month payout ratio for the stock is 14%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect ICBK's payout to fall to 12% of its earnings. Assuming a constant share price, this equates to a dividend yield of 1.4%. Furthermore, EPS is also forecasted to fall to $2.02 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. Unfortunately, it is really too early to view County Bancorp as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, County Bancorp generates a yield of 1.1%, which is on the low-side for Banks stocks.
Now you know to keep in mind the reason why investors should be careful investing in County Bancorp for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. Below, I've compiled three relevant aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for ICBK’s future growth? Take a look at our free research report of analyst consensus for ICBK’s outlook.
- Valuation: What is ICBK 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 ICBK 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.
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.