It looks like Community Bank System, Inc. (NYSE:CBU) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 13th of September will not receive this dividend, which will be paid on the 10th of October.
Community Bank System's next dividend payment will be US$0.41 per share, and in the last 12 months, the company paid a total of US$1.52 per share. Calculating the last year's worth of payments shows that Community Bank System has a trailing yield of 2.7% on the current share price of $61.26. 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 check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Community Bank System paid out a comfortable 46% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Community Bank System's earnings per share have risen 11% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Community Bank System has delivered an average of 6.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Has Community Bank System got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Community Bank System appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Ever wonder what the future holds for Community Bank System? See what the eight analysts we track 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 firstname.lastname@example.org. 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.