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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cortland Bancorp (NASDAQ:CLDB) is about to trade ex-dividend in the next four days. Investors can purchase shares before the 14th of May in order to be eligible for this dividend, which will be paid on the 1st of June.
Cortland Bancorp's next dividend payment will be US$0.15 per share, and in the last 12 months, the company paid a total of US$0.65 per share. Looking at the last 12 months of distributions, Cortland Bancorp has a trailing yield of approximately 2.7% on its current stock price of $23.71. 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 Cortland 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. Cortland Bancorp is paying out just 24% 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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Cortland Bancorp's earnings per share have been growing at 19% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, Cortland Bancorp has increased its dividend at approximately 21% a year on average. 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
Has Cortland Bancorp 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, Cortland Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
On that note, you'll want to research what risks Cortland Bancorp is facing. To help with this, we've discovered 3 warning signs for Cortland Bancorp 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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