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 Bank of the James Financial Group, Inc. (NASDAQ:BOTJ) is about to go ex-dividend in just 4 days. You can purchase shares before the 5th of March in order to receive the dividend, which the company will pay on the 20th of March.
Bank of the James Financial Group's next dividend payment will be US$0.07 per share, and in the last 12 months, the company paid a total of US$0.28 per share. Looking at the last 12 months of distributions, Bank of the James Financial Group has a trailing yield of approximately 2.0% on its current stock price of $13.79. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Bank of the James Financial Group has a low and conservative payout ratio of just 20% of its income after tax.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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 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 Bank of the James Financial Group, with earnings per share up 4.8% 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. Bank of the James Financial Group has delivered an average of 5.8% per year annual increase in its dividend, based on the past six years of dividend payments. 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
From a dividend perspective, should investors buy or avoid Bank of the James Financial Group? 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, Bank of the James Financial Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Want to learn more about Bank of the James Financial Group's dividend performance? Check out this visualisation 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.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.