Orange County Bancorp, Inc. (NASDAQ:OBT) is about to trade ex-dividend in the next three 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Orange County Bancorp's shares on or after the 4th of June, you won't be eligible to receive the dividend, when it is paid on the 14th of June.

The company's next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.92 per share. Looking at the last 12 months of distributions, Orange County Bancorp has a trailing yield of approximately 1.9% on its current stock price of US$48.75. If you buy this business for its dividend, you should have an idea of whether Orange County Bancorp's dividend is reliable and sustainable. As a result, readers should always check whether Orange County 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. Orange County Bancorp is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Orange County Bancorp has grown its earnings rapidly, up 27% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Orange County Bancorp has increased its dividend at approximately 4.5% 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

From a dividend perspective, should investors buy or avoid Orange County Bancorp? Companies like Orange County Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Orange County Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Orange County Bancorp for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Orange County Bancorp that we strongly recommend you have a look at before investing in the company.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.