Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see C&F Financial Corporation (NASDAQ:CFFI) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a 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. In other words, investors can purchase C&F Financial's shares before the 14th of March in order to be eligible for the dividend, which will be paid on the 1st of April.

The company's next dividend payment will be US$0.44 per share, on the back of last year when the company paid a total of US$1.68 to shareholders. Looking at the last 12 months of distributions, C&F Financial has a trailing yield of approximately 2.9% on its current stock price of $58.78. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View 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 is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

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?

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. It's encouraging to see C&F Financial has grown its earnings rapidly, up 35% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, C&F Financial has lifted its dividend by approximately 4.9% a year on average. 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.

The Bottom Line

Has C&F Financial got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating C&F Financial more closely.

In light of that, while C&F Financial has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for C&F Financial you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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