Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Arrow Financial Corporation (NASDAQ:AROW) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 1st of September to receive the dividend, which will be paid on the 15th of September.
Arrow Financial's next dividend payment will be US$0.26 per share, on the back of last year when the company paid a total of US$1.04 to shareholders. Last year's total dividend payments show that Arrow Financial has a trailing yield of 3.7% on the current share price of $27.9. If you buy this business for its dividend, you should have an idea of whether Arrow Financial's dividend is reliable and sustainable. So we need to investigate whether Arrow Financial can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Arrow Financial paid out a comfortable 42% 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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Arrow Financial, with earnings per share up 8.9% 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. In the last 10 years, Arrow Financial has lifted its dividend by approximately 3.0% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Arrow Financial worth buying for its dividend? Arrow Financial has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, Arrow Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Arrow Financial has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Arrow Financial you should be aware of.
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.
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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