Readers hoping to buy Community Bankers Trust Corporation (NASDAQ:ESXB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 21st of May will not receive the dividend, which will be paid on the 1st of June.
Community Bankers Trust's next dividend payment will be US$0.05 per share, on the back of last year when the company paid a total of US$0.20 to shareholders. Looking at the last 12 months of distributions, Community Bankers Trust has a trailing yield of approximately 4.1% on its current stock price of $4.91. If you buy this business for its dividend, you should have an idea of whether Community Bankers Trust's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Community Bankers Trust has a low and conservative payout ratio of just 25% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Community Bankers Trust's earnings per share have been growing at 13% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past ten years, Community Bankers Trust has increased its dividend at approximately 2.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
From a dividend perspective, should investors buy or avoid Community Bankers Trust? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Community Bankers Trust looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in Community Bankers Trust for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Community Bankers Trust (of which 1 is concerning!) you should know about.
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.