Here's What We Like About Community Financial's (NASDAQ:TCFC) Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The Community Financial Corporation (NASDAQ:TCFC) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 5th of October to receive the dividend, which will be paid on the 20th of October.
Community Financial's upcoming dividend is US$0.13 a share, following on from the last 12 months, when the company distributed a total of US$0.50 per share to shareholders. Calculating the last year's worth of payments shows that Community Financial has a trailing yield of 2.4% on the current share price of $21. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Community Financial has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Community Financial
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. Community Financial paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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?
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Community Financial's earnings per share have risen 12% per annum over the last five years.
We'd also point out that Community Financial issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Community Financial has lifted its dividend by approximately 2.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Final Takeaway
Should investors buy Community Financial for the upcoming dividend? Companies like Community Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Community Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in Community Financial for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Community Financial that you should be aware of before investing in their shares.
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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