Shares of Fauquier Bankshares Inc (NASDAQ:FBSS) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.12 per share, investors must have owned the shares prior to 13 September 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Should you diversify into Fauquier Bankshares and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Fauquier Bankshares fit our criteria?
The current trailing twelve-month payout ratio for the stock is 45.4%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality facing FBSS investors is that whilst it has continued to pay shareholders dividend, there has not been any increase in the level of dividends paid in the past decade. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
In terms of its peers, Fauquier Bankshares produces a yield of 2.0%, which is on the low-side for Banks stocks.
If Fauquier Bankshares is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three fundamental factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for FBSS’s future growth? Take a look at our free research report of analyst consensus for FBSS’s outlook.
- Valuation: What is FBSS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FBSS is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.