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It looks like Emclaire Financial Corp (NASDAQ:EMCF) is about to go ex-dividend in the next four days. This means that investors who purchase shares on or after the 30th of November will not receive the dividend, which will be paid on the 18th of December.
Emclaire Financial's next dividend payment will be US$0.30 per share. Last year, in total, the company distributed US$1.20 to shareholders. Based on the last year's worth of payments, Emclaire Financial has a trailing yield of 4.9% on the current stock price of $24.45. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Emclaire Financial paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies.
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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Emclaire Financial's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Emclaire Financial has delivered an average of 5.0% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Should investors buy Emclaire Financial for the upcoming dividend? Emclaire Financial's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
With that in mind though, if the poor dividend characteristics of Emclaire Financial don't faze you, it's worth being mindful of the risks involved with this business. In terms of investment risks, we've identified 1 warning sign with Emclaire Financial and understanding them should be part of your investment process.
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.
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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