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It looks like Glen Burnie Bancorp (NASDAQ:GLBZ) is about to go ex-dividend in the next three days. If you purchase the stock on or after the 22nd of January, you won't be eligible to receive this dividend, when it is paid on the 8th of February.
Glen Burnie Bancorp's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Calculating the last year's worth of payments shows that Glen Burnie Bancorp has a trailing yield of 3.5% on the current share price of $11.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Glen Burnie Bancorp has been able to grow its dividends, or if the dividend might be cut.
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. Glen Burnie Bancorp paid out 68% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Glen Burnie Bancorp's earnings are down 3.3% a year over the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Glen Burnie Bancorp's dividend payments are broadly unchanged compared to where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
To Sum It Up
Has Glen Burnie Bancorp got what it takes to maintain its dividend payments? We're not overly enthused to see Glen Burnie Bancorp's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
So if you're still interested in Glen Burnie Bancorp despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To help with this, we've discovered 2 warning signs for Glen Burnie Bancorp that you should be aware of before investing in their shares.
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.
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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