It looks like C&F Financial Corporation (NASDAQ:CFFI) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, C&F Financial investors that purchase the stock on or after the 14th of March will not receive the dividend, which will be paid on the 1st of April.
The company's next dividend payment will be US$0.44 per share, and in the last 12 months, the company paid a total of US$1.68 per share. Calculating the last year's worth of payments shows that C&F Financial has a trailing yield of 2.9% on the current share price of $58.78. 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.
View our latest analysis for C&F Financial
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. C&F Financial has a low and conservative payout ratio of just 20% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit C&F Financial paid out over the last 12 months.
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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see C&F Financial's earnings have been skyrocketing, up 35% per annum for 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. C&F Financial has delivered 4.9% dividend growth per year on average over the past 10 years. 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.
The Bottom Line
Is C&F Financial worth buying for its dividend? 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. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, C&F Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
So while C&F Financial looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with C&F Financial and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.