BayCom Corp (NASDAQ:BCML) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase BayCom's shares before the 7th of March in order to be eligible for the dividend, which will be paid on the 12th of April.

The company's next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Looking at the last 12 months of distributions, BayCom has a trailing yield of approximately 2.0% on its current stock price of US$19.82. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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. BayCom has a low and conservative payout ratio of just 18% 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. With that in mind, we're encouraged by the steady growth at BayCom, with earnings per share up 9.8% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. BayCom has delivered 41% dividend growth per year on average over the past two years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Should investors buy BayCom for the upcoming dividend? BayCom has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating BayCom more closely.

While it's tempting to invest in BayCom for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for BayCom (1 makes us a bit uncomfortable) you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.