Yahoo Finance VersaBank (TSE:VB) Looks Interesting, And It's About To Pay A Dividend
Readers hoping to buy VersaBank (TSE:VB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 3rd of October will not receive this dividend, which will be paid on the 31st of October.
VersaBank's next dividend payment will be CA$0.02 per share, on the back of last year when the company paid a total of CA$0.08 to shareholders. Based on the last year's worth of payments, VersaBank stock has a trailing yield of around 1.1% on the current share price of CA$7.01. 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 investigate whether VersaBank can afford its dividend, and if the dividend could grow.
View our latest analysis for VersaBank
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. VersaBank is paying out just 7.1% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit VersaBank 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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see VersaBank has grown its earnings rapidly, up 51% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last two years, VersaBank has lifted its dividend by approximately 41% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Has VersaBank got what it takes to maintain its dividend payments? 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. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. VersaBank ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Want to learn more about VersaBank? Here's a visualisation of its historical rate of revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
