It looks like Two River Bancorp (NASDAQ:TRCB) is about to go ex-dividend in the next 4 days. You can purchase shares before the 8th of August in order to receive the dividend, which the company will pay on the 30th of August.
Two River Bancorp's upcoming dividend is US$0.07 a share, following on from the last 12 months, when the company distributed a total of US$0.28 per share to shareholders. Calculating the last year's worth of payments shows that Two River Bancorp has a trailing yield of 2.0% on the current share price of $13.93. 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! We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Two River Bancorp paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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 Two River Bancorp's earnings per share have risen 19% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 6 years, Two River Bancorp has increased its dividend at approximately 24% 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.
To Sum It Up
Has Two River Bancorp got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. 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, Two River Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Wondering what the future holds for Two River Bancorp? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.