Dividend Investors: Don't Be Too Quick To Buy Bar Harbor Bankshares (NYSEMKT:BHB) 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 Bar Harbor Bankshares (NYSEMKT:BHB) is about to go ex-dividend in just four days. Ex-dividend means that investors that purchase the stock on or after the 17th of August will not receive this dividend, which will be paid on the 18th of September.
Bar Harbor Bankshares's next dividend payment will be US$0.22 per share. Last year, in total, the company distributed US$0.88 to shareholders. Looking at the last 12 months of distributions, Bar Harbor Bankshares has a trailing yield of approximately 4.1% on its current stock price of $21.63. If you buy this business for its dividend, you should have an idea of whether Bar Harbor Bankshares's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Bar Harbor Bankshares
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. Bar Harbor Bankshares paid out 54% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see how much of its profit Bar Harbor Bankshares paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Bar Harbor Bankshares's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Bar Harbor Bankshares has lifted its dividend by approximately 6.6% a year on average.
Final Takeaway
Is Bar Harbor Bankshares worth buying for its dividend? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
Keen to explore more data on Bar Harbor Bankshares's financial performance? Check out our visualisation of its historical revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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