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 1st Constitution Bancorp (NASDAQ:FCCY) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 13th of May will not receive this dividend, which will be paid on the 28th of May.
1st Constitution Bancorp's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$0.36 per share. Calculating the last year's worth of payments shows that 1st Constitution Bancorp has a trailing yield of 2.1% on the current share price of $18.9. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. 1st Constitution Bancorp is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, 1st Constitution Bancorp's earnings per share have been growing at 12% 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. In the past five years, 1st Constitution Bancorp has increased its dividend at approximately 15% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Is 1st Constitution Bancorp worth buying for its dividend? Companies like 1st Constitution Bancorp 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, 1st Constitution Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while 1st Constitution Bancorp has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for 1st Constitution Bancorp (1 is significant) you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top 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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