Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cambridge Bancorp (NASDAQ:CATC) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 5th of February to receive the dividend, which will be paid on the 20th of February.
Cambridge Bancorp's next dividend payment will be US$0.53 per share. Last year, in total, the company distributed US$2.12 to shareholders. Based on the last year's worth of payments, Cambridge Bancorp stock has a trailing yield of around 2.9% on the current share price of $72.18. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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. That's why it's good to see Cambridge Bancorp paying out a modest 38% of its earnings.
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?
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 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 Cambridge Bancorp, with earnings per share up 7.3% 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. Cambridge Bancorp has delivered 4.9% dividend growth per year on average over the past ten years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Should investors buy Cambridge Bancorp for the upcoming dividend? Cambridge Bancorp 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 Cambridge Bancorp more closely.
Wondering what the future holds for Cambridge Bancorp? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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.
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