It looks like ChoiceOne Financial Services, Inc. (NASDAQ:COFS) is about to go ex-dividend in the next day or so. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. This means that investors who purchase ChoiceOne Financial Services’ shares on or after the 14th of September will not receive the dividend, which will be paid on the 30th of September.
The company’s next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$0.88 per share. Looking at the last 12 months of distributions, ChoiceOne Financial Services has a trailing yield of approximately 4.0% on its current stock price of $25.16. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it’s 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. Fortunately ChoiceOne Financial Services’s payout ratio is modest, at just 35% of profit.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit ChoiceOne Financial Services paid out over the last 12 months.
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 ChoiceOne Financial Services earnings per share are up 9.3% 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. ChoiceOne Financial Services has delivered an average of 8.7% per year annual increase in its dividend, based on the past 10 years of dividend payments. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Should investors buy ChoiceOne Financial Services for the upcoming 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. ChoiceOne Financial Services ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Want to learn more about ChoiceOne Financial Services’s dividend performance? Check out this visualisation of its historical revenue and earnings growth.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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