There's A Lot To Like About Farmers & Merchants Bancorp's (NASDAQ:FMAO) Upcoming US$0.17 Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Farmers & Merchants Bancorp, Inc. (NASDAQ:FMAO) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 28th of September in order to be eligible for this dividend, which will be paid on the 20th of October.
Farmers & Merchants Bancorp's next dividend payment will be US$0.17 per share, on the back of last year when the company paid a total of US$0.64 to shareholders. Based on the last year's worth of payments, Farmers & Merchants Bancorp has a trailing yield of 3.2% on the current stock price of $20.99. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Farmers & Merchants Bancorp has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Farmers & Merchants Bancorp
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. Farmers & Merchants Bancorp paid out a comfortable 39% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit Farmers & Merchants Bancorp paid out over the last 12 months.
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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Farmers & Merchants Bancorp, with earnings per share up 9.1% on average 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. Since the start of our data, 10 years ago, Farmers & Merchants Bancorp has lifted its dividend by approximately 6.6% 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.
The Bottom Line
Should investors buy Farmers & Merchants Bancorp for the upcoming 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. In summary, Farmers & Merchants Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Curious about whether Farmers & Merchants Bancorp has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
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.
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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