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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 Glen Burnie Bancorp (NASDAQ:GLBZ) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 16th of April to receive the dividend, which will be paid on the 30th of April.
Glen Burnie Bancorp's next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Based on the last year's worth of payments, Glen Burnie Bancorp has a trailing yield of 3.4% on the current stock price of $11.63. 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. Glen Burnie Bancorp paid out 68% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Glen Burnie Bancorp, with earnings per share up 3.8% 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. Glen Burnie Bancorp's dividend payments are effectively flat on where they were 10 years ago.
To Sum It Up
Has Glen Burnie Bancorp got what it takes to maintain its dividend payments? Glen Burnie Bancorp has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We think there are likely better opportunities out there.
If you're not too concerned about Glen Burnie Bancorp's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we've identified 2 warning signs with Glen Burnie Bancorp and understanding them should be part of your investment process.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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