Should Southern National Bancorp of Virginia, Inc. (NASDAQ:SONA) Be Part Of Your Portfolio?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Southern National Bancorp of Virginia, Inc. (NASDAQ:SONA) has paid a dividend to shareholders. It currently yields 2.2%. Does Southern National Bancorp of Virginia tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Southern National Bancorp of Virginia
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How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How does Southern National Bancorp of Virginia fare?
The company currently pays out 31% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 23% which, assuming the share price stays the same, leads to a dividend yield of around 2.2%. However, EPS should increase to $1.36, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Southern National Bancorp of Virginia as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Southern National Bancorp of Virginia has a yield of 2.2%, which is on the low-side for Banks stocks.
Next Steps:
Whilst there are few things you may like about Southern National Bancorp of Virginia from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for SONA’s future growth? Take a look at our free research report of analyst consensus for SONA’s outlook.
Valuation: What is SONA worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SONA is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
