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Should Income Investors Look At Community Bank System, Inc. (NYSE:CBU) Before Its Ex-Dividend?

Simply Wall St
·3 mins read

Community Bank System, Inc. (NYSE:CBU) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 14th of September, you won't be eligible to receive this dividend, when it is paid on the 9th of October.

Community Bank System's next dividend payment will be US$0.42 per share, on the back of last year when the company paid a total of US$1.64 to shareholders. Last year's total dividend payments show that Community Bank System has a trailing yield of 2.8% on the current share price of $59.85. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Community Bank System can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Community Bank System

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 Bank System paid out more than half (54%) of its earnings last year, which is a regular payout ratio for most companies.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Community Bank System earnings per share are up 6.1% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Community Bank System has lifted its dividend by approximately 6.7% 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 Community Bank System for the upcoming dividend? Community Bank System 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're unconvinced on the company's merits, and think there might be better opportunities out there.

If you want to look further into Community Bank System, it's worth knowing the risks this business faces. Case in point: We've spotted 1 warning sign for Community Bank System you should be aware of.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.