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 TriCo Bancshares (NASDAQ:TCBK) is about to go ex-dividend in just 3 days. You can purchase shares before the 12th of March in order to receive the dividend, which the company will pay on the 27th of March.
TriCo Bancshares's next dividend payment will be US$0.22 per share, and in the last 12 months, the company paid a total of US$0.88 per share. Based on the last year's worth of payments, TriCo Bancshares stock has a trailing yield of around 2.6% on the current share price of $33.29. If you buy this business for its dividend, you should have an idea of whether TriCo Bancshares's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's 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. That's why it's good to see TriCo Bancshares paying out a modest 27% of its earnings.
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?
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 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 TriCo Bancshares's earnings per share have risen 15% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, ten years ago, TriCo Bancshares has lifted its dividend by approximately 5.4% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
Has TriCo Bancshares got what it takes to maintain its dividend payments? Companies like TriCo Bancshares that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. TriCo Bancshares ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
While it's tempting to invest in TriCo Bancshares for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 3 warning signs for TriCo Bancshares (1 is a bit unpleasant) you should be aware of.
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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