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Is It Smart To Buy Central Valley Community Bancorp (NASDAQ:CVCY) Before It Goes Ex-Dividend?

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Central Valley Community Bancorp (NASDAQ:CVCY) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Central Valley Community Bancorp's shares before the 5th of August in order to receive the dividend, which the company will pay on the 20th of August.

The company's next dividend payment will be US$0.12 per share, and in the last 12 months, the company paid a total of US$0.48 per share. Looking at the last 12 months of distributions, Central Valley Community Bancorp has a trailing yield of approximately 2.1% on its current stock price of $22.39. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Central Valley Community Bancorp

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. Central Valley Community Bancorp is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Central Valley Community Bancorp's earnings per share have been growing at 16% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Central Valley Community Bancorp has delivered an average of 10% per year annual increase in its dividend, based on the past nine 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.

To Sum It Up

Is Central Valley Community Bancorp 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. 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, Central Valley Community Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Central Valley Community Bancorp for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Central Valley Community Bancorp (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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 (at) simplywallst.com.