Is It Smart To Buy Community Trust Bancorp, Inc. (NASDAQ:CTBI) Before It Goes Ex-Dividend?
Community Trust Bancorp, Inc. (NASDAQ:CTBI) stock is about to trade ex-dividend in 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Community Trust Bancorp's shares on or after the 14th of June, you won't be eligible to receive the dividend, when it is paid on the 3rd of July.
The company's next dividend payment will be US$0.44 per share, and in the last 12 months, the company paid a total of US$1.76 per share. Last year's total dividend payments show that Community Trust Bancorp has a trailing yield of 4.5% on the current share price of $38.855. 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 Community Trust Bancorp can afford its dividend, and if the dividend could grow.
See our latest analysis for Community Trust Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Community Trust Bancorp paid out a comfortable 38% of its profit last year.
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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Community Trust Bancorp, with earnings per share up 9.2% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Community Trust Bancorp has delivered an average of 4.4% 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.
The Bottom Line
Is Community Trust Bancorp worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Community Trust Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
In light of that, while Community Trust Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Community Trust Bancorp has 1 warning sign we think you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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