It looks like RBB Bancorp (NASDAQ:RBB) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 30th of July in order to be eligible for this dividend, which will be paid on the 15th of August.
RBB Bancorp's next dividend payment will be US$0.10 per share, on the back of last year when the company paid a total of US$0.40 to shareholders. Last year's total dividend payments show that RBB Bancorp has a trailing yield of 2.1% on the current share price of $19.08. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether RBB Bancorp has been able to grow its dividends, or if the dividend might be cut.
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. RBB Bancorp has a low and conservative payout ratio of just 19% of its income after tax.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see RBB Bancorp has grown its earnings rapidly, up 27% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. RBB Bancorp has delivered an average of 12% per year annual increase in its dividend, based on the past 2 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is RBB Bancorp an attractive dividend stock, or better left on the shelf? 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. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, RBB Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Curious what other investors think of RBB Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
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.
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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. Thank you for reading.