Readers hoping to buy Community Financial System, Inc. (NYSE:CBU) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Community Financial System’s shares before the 13th of December in order to be eligible for the dividend, which will be paid on the 10th of January.
The company’s upcoming dividend is US$0.46 a share, following on from the last 12 months, when the company distributed a total of US$1.84 per share to shareholders. Calculating the last year’s worth of payments shows that Community Financial System has a trailing yield of 2.7% on the current share price of US$68.68. If you buy this business for its dividend, you should have an idea of whether Community Financial System’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.
Check out our latest analysis for Community Financial System
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. Community Financial System paid out more than half (58%) of its earnings last year, which is a regular payout ratio for most companies.
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.
Companies that aren’t growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we’re not enthused to see that Community Financial System’s earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Community Financial System has delivered 5.1% dividend growth per year on average over the past 10 years.
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