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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 C&F Financial Corporation (NASDAQ:CFFI) is about to go ex-dividend in just four 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase C&F Financial's shares before the 14th of June in order to be eligible for the dividend, which will be paid on the 1st of July.
The company's next dividend payment will be US$0.44 per share. Last year, in total, the company distributed US$1.76 to shareholders. Calculating the last year's worth of payments shows that C&F Financial has a trailing yield of 3.1% on the current share price of $57.31. If you buy this business for its dividend, you should have an idea of whether C&F Financial's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for C&F Financial
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. C&F Financial has a low and conservative payout ratio of just 20% 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 how much of its profit C&F Financial paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 C&F Financial's earnings have been skyrocketing, up 36% 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. C&F Financial has delivered an average of 5.0% 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 C&F Financial is keeping back more of its profits to grow the business.