Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CB Financial Services, Inc. (NASDAQ:CBFV) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 5th of March to receive the dividend, which will be paid on the 16th of March.
CB Financial Services's upcoming dividend is US$0.24 a share, following on from the last 12 months, when the company distributed a total of US$0.96 per share to shareholders. Looking at the last 12 months of distributions, CB Financial Services has a trailing yield of approximately 3.3% on its current stock price of $28.94. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see CB Financial Services paying out a modest 36% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see CB Financial Services's earnings per share have risen 10% 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. CB Financial Services has delivered 2.3% dividend growth per year on average over the past six years. Earnings per share have been growing much quicker than dividends, potentially because CB Financial Services is keeping back more of its profits to grow the business.
To Sum It Up
From a dividend perspective, should investors buy or avoid CB Financial Services? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating CB Financial Services more closely.
Curious what other investors think of CB Financial Services? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.
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.
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