Colony Bankcorp, Inc. (NASDAQ:CBAN) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 29th of October will not receive the dividend, which will be paid on the 13th of November.
Colony Bankcorp's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Based on the last year's worth of payments, Colony Bankcorp stock has a trailing yield of around 3.1% on the current share price of $12.75. If you buy this business for its dividend, you should have an idea of whether Colony Bankcorp's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. That's why it's good to see Colony Bankcorp paying out a modest 37% of its earnings.
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.
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 Colony Bankcorp's earnings per share have risen 12% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Colony Bankcorp has delivered an average of 41% per year annual increase in its dividend, based on the past four years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Should investors buy Colony Bankcorp for the upcoming dividend? Companies like Colony Bankcorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Colony Bankcorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Colony Bankcorp has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Colony Bankcorp that you should be aware of before investing in their 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.
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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