Emclaire Financial Corp (NASDAQ:EMCF) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 28th of February, you won't be eligible to receive this dividend, when it is paid on the 20th of March.
Emclaire Financial's upcoming dividend is US$0.30 a share, following on from the last 12 months, when the company distributed a total of US$1.16 per share to shareholders. Looking at the last 12 months of distributions, Emclaire Financial has a trailing yield of approximately 3.7% on its current stock price of $32.8397. 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! As a result, readers should always check whether Emclaire Financial 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 Emclaire Financial's payout ratio is modest, at just 40% of profit.
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 in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Emclaire Financial, with earnings per share up 5.4% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last ten years, Emclaire Financial has lifted its dividend by approximately 7.9% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy Emclaire Financial for the upcoming dividend? Emclaire Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Emclaire Financial more closely.
Want to learn more about Emclaire Financial's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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.
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