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Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI) is about to trade ex-dividend in the next 2 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Richmond Mutual Bancorporation's shares on or after the 2nd of June will not receive the dividend, which will be paid on the 17th of June.
The company's next dividend payment will be US$0.07 per share. Last year, in total, the company distributed US$0.28 to shareholders. Calculating the last year's worth of payments shows that Richmond Mutual Bancorporation has a trailing yield of 1.9% on the current share price of $14.61. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Richmond Mutual Bancorporation can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Richmond Mutual Bancorporation paying out a modest 26% of its earnings.
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.
Given that Richmond Mutual Bancorporation has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Is Richmond Mutual Bancorporation an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Richmond Mutual Bancorporation looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Richmond Mutual Bancorporation that you should be aware of before investing in their shares.
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.
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