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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Orange County Bancorp, Inc. (NASDAQ:OBT) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Orange County Bancorp's shares before the 4th of December to receive the dividend, which will be paid on the 16th of December.
The company's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$0.92 to shareholders. Looking at the last 12 months of distributions, Orange County Bancorp has a trailing yield of approximately 1.6% on its current stock price of US$59.05. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Orange County Bancorp has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Orange County Bancorp
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Orange County Bancorp has a low and conservative payout ratio of just 18% of its income after tax.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Orange County Bancorp's earnings have been skyrocketing, up 22% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Orange County Bancorp has delivered an average of 4.5% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Orange County Bancorp is keeping back more of its profits to grow the business.