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Central Valley Community Bancorp (NASDAQ:CVCY) Is Increasing Its Dividend To US$0.12

Central Valley Community Bancorp (NASDAQ:CVCY) has announced that it will be increasing its dividend on the 20th of August to US$0.12. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

Check out our latest analysis for Central Valley Community Bancorp

Central Valley Community Bancorp's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Central Valley Community Bancorp's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 1.5%. If the dividend continues along recent trends, we estimate the payout ratio could be 26%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

historic-dividend
historic-dividend

Central Valley Community Bancorp's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The first annual payment during the last 9 years was US$0.20 in 2012, and the most recent fiscal year payment was US$0.48. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

We Could See Central Valley Community Bancorp's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Central Valley Community Bancorp has seen EPS rising for the last five years, at 9.3% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Central Valley Community Bancorp's prospects of growing its dividend payments in the future.

Central Valley Community Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Central Valley Community Bancorp (of which 1 shouldn't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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