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Salisbury Bancorp, Inc. (NASDAQ:SAL) Looks Interesting, And It's About To Pay A Dividend

Salisbury Bancorp, Inc. (NASDAQ:SAL) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Salisbury Bancorp's shares before the 12th of May to receive the dividend, which will be paid on the 27th of May.

The company's upcoming dividend is US$0.32 a share, following on from the last 12 months, when the company distributed a total of US$1.28 per share to shareholders. Calculating the last year's worth of payments shows that Salisbury Bancorp has a trailing yield of 2.6% on the current share price of $49.81. If you buy this business for its dividend, you should have an idea of whether Salisbury Bancorp's dividend is reliable and sustainable. So we need to investigate whether Salisbury Bancorp can afford its dividend, and if the dividend could grow.

See our latest analysis for Salisbury Bancorp

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Salisbury Bancorp is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

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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.

Click here to see how much of its profit Salisbury Bancorp paid out over the last 12 months.

historic-dividend
historic-dividend

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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Salisbury Bancorp's earnings per share have been growing at 17% 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. Salisbury Bancorp has delivered 1.3% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Should investors buy Salisbury Bancorp for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Salisbury Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

So while Salisbury Bancorp looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with Salisbury Bancorp and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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.