Should You Buy Colony Bankcorp, Inc. (NYSE:CBAN) For Its Upcoming Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Colony Bankcorp, Inc. (NYSE:CBAN) is about to go ex-dividend in just four 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 important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Colony Bankcorp's shares before the 5th of August in order to receive the dividend, which the company will pay on the 19th of August.
The company's next dividend payment will be US$0.12 per share. Last year, in total, the company distributed US$0.48 to shareholders. Calculating the last year's worth of payments shows that Colony Bankcorp has a trailing yield of 2.2% on the current share price of US$21.75. If you buy this business for its dividend, you should have an idea of whether Colony Bankcorp's dividend is reliable and sustainable. 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 Colony Bankcorp's payout ratio is modest, at just 28% of profit.
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.
Check out our latest analysis for Colony Bankcorp
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. This is why it's a relief to see Colony Bankcorp earnings per share are up 4.4% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, Colony Bankcorp has lifted its dividend by approximately 19% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy Colony Bankcorp for the upcoming dividend? Colony Bankcorp 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 Colony Bankcorp more closely.
On that note, you'll want to research what risks Colony Bankcorp is facing. For example, we've found 1 warning sign for Colony Bankcorp that we recommend you consider before investing in the business.
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.