Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Colony Bankcorp, Inc. (NASDAQ:CBAN) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Colony Bankcorp's shares on or after the 4th of August, you won't be eligible to receive the dividend, when it is paid on the 20th of August.

The company's next dividend payment will be US$0.11 per share, and in the last 12 months, the company paid a total of US$0.43 per share. Last year's total dividend payments show that Colony Bankcorp has a trailing yield of 2.9% on the current share price of $14.52. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Colony Bankcorp

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. That's why it's good to see Colony Bankcorp paying out a modest 34% of its earnings.

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 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. This is why it's a relief to see Colony Bankcorp earnings per share are up 4.3% per annum over the last five years.

Colony Bankcorp also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.