Banc of California, Inc. (NYSE:BANC) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Therefore, if you purchase Banc of California’s shares on or after the 14th of June, you won’t be eligible to receive the dividend, when it is paid on the 1st of July.
The company’s next dividend payment will be US$0.06 per share, on the back of last year when the company paid a total of US$0.24 to shareholders. Calculating the last year’s worth of payments shows that Banc of California has a trailing yield of 1.3% on the current share price of $18.18. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Banc of California can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Banc of California is paying out just 16% 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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we’re not enthused to see that Banc of California’s earnings per share have remained effectively flat over the past five years. We’d take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Banc of California’s dividend payments per share have declined at 6.3% per year on average over the past 10 years, which is uninspiring.
The Bottom Line
Has Banc of California got what it takes to maintain its dividend payments? Banc of California has seen its earnings per share stagnate in recent years, although the company reinvests more than half of its profits in the business, which could bode well for its future prospects. Overall, Banc of California looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
On that note, you’ll want to research what risks Banc of California is facing. Case in point: We’ve spotted 1 warning sign for Banc of California you should be aware of.
If you’re in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.