Readers hoping to buy Bank of South Carolina Corporation (NASDAQ:BKSC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 3rd of April, you won't be eligible to receive this dividend, when it is paid on the 30th of April.
Bank of South Carolina's next dividend payment will be US$0.16 per share, on the back of last year when the company paid a total of US$0.64 to shareholders. Last year's total dividend payments show that Bank of South Carolina has a trailing yield of 4.4% on the current share price of $14.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Bank of South Carolina's payout ratio is modest, at just 48% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Bank of South Carolina's earnings per share have risen 10% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bank of South Carolina has delivered an average of 2.9% per year annual increase in its dividend, based on the past ten years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Bank of South Carolina is keeping back more of its profits to grow the business.
The Bottom Line
Should investors buy Bank of South Carolina for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Bank of South Carolina looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 3 warning signs for Bank of South Carolina (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.