Don't Race Out To Buy Evans Bancorp, Inc. (NYSEMKT:EVBN) Just Because It's Going Ex-Dividend
Evans Bancorp, Inc. (NYSEMKT:EVBN) stock is about to trade ex-dividend in 4 days. Investors can purchase shares before the 14th of September in order to be eligible for this dividend, which will be paid on the 6th of October.
Evans Bancorp's upcoming dividend is US$0.58 a share, following on from the last 12 months, when the company distributed a total of US$1.16 per share to shareholders. Looking at the last 12 months of distributions, Evans Bancorp has a trailing yield of approximately 5.1% on its current stock price of $22.9. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Evans Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Evans Bancorp is paying out an acceptable 57% of its profit, a common payout level among 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.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Evans Bancorp's flat earnings 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Evans Bancorp has lifted its dividend by approximately 6.6% a year on average.
Final Takeaway
Should investors buy Evans Bancorp for the upcoming dividend? Evans Bancorp's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
With that being said, if you're still considering Evans Bancorp as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 3 warning signs for Evans Bancorp that we recommend you consider before investing in the business.
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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