Should You Buy Community Trust Bancorp, Inc. (NASDAQ:CTBI) For Its Upcoming Dividend?

Community Trust Bancorp, Inc. (NASDAQ:CTBI) stock is about to trade ex-dividend in 4 days. Investors can purchase shares before the 12th of March in order to be eligible for this dividend, which will be paid on the 1st of April.

Community Trust Bancorp's next dividend payment will be US$0.39 per share. Last year, in total, the company distributed US$1.54 to shareholders. Looking at the last 12 months of distributions, Community Trust Bancorp has a trailing yield of approximately 3.5% on its current stock price of $44.23. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Community Trust Bancorp can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Community Trust Bancorp

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Community Trust Bancorp paid out a comfortable 46% of its profit last year.

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.

historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 Community Trust Bancorp, with earnings per share up 4.7% 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. Community Trust Bancorp has delivered an average of 3.5% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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

Is Community Trust Bancorp worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Community Trust Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Wondering what the future holds for Community Trust Bancorp? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

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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