It looks like Central Valley Community Bancorp (NASDAQ:CVCY) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 1st of August in order to be eligible for this dividend, which will be paid on the 16th of August.
Central Valley Community Bancorp's next dividend payment will be US$0.11 per share, on the back of last year when the company paid a total of US$0.44 to shareholders. Based on the last year's worth of payments, Central Valley Community Bancorp stock has a trailing yield of around 2.1% on the current share price of $21.06. 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 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. Central Valley Community Bancorp is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Central Valley Community Bancorp's earnings per share have risen 16% per annum 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 10 years, Central Valley Community Bancorp has lifted its dividend by approximately 16% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Central Valley Community Bancorp an attractive dividend stock, or better left on the shelf? Companies like Central Valley Community Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Central Valley Community Bancorp more closely.
Ever wonder what the future holds for Central Valley Community Bancorp? See what the five 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.
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