Cortland Bancorp (NASDAQ:CLDB) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 7th of February in order to be eligible for this dividend, which will be paid on the 2nd of March.
Cortland Bancorp's next dividend payment will be US$0.19 per share, and in the last 12 months, the company paid a total of US$0.61 per share. Based on the last year's worth of payments, Cortland Bancorp has a trailing yield of 3.1% on the current stock price of $19.95. If you buy this business for its dividend, you should have an idea of whether Cortland Bancorp's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Fortunately Cortland Bancorp's payout ratio is modest, at just 27% of profit.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Cortland Bancorp's earnings per share have risen 15% 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. Cortland Bancorp's dividend payments per share have declined at 3.5% per year on average over the past ten years, which is uninspiring. Cortland Bancorp is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
Is Cortland Bancorp an attractive dividend stock, or better left on the shelf? 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. We think this is a pretty attractive combination, and would be interested in investigating Cortland Bancorp more closely.
Want to learn more about Cortland Bancorp's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top 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.
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