Be Sure To Check Out TowneBank (NASDAQ:TOWN) Before It Goes Ex-Dividend

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 TowneBank (NASDAQ:TOWN) is about to go ex-dividend in just three 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, TowneBank investors that purchase the stock on or after the 29th of June will not receive the dividend, which will be paid on the 12th of July.

The company's upcoming dividend is US$0.23 a share, following on from the last 12 months, when the company distributed a total of US$0.80 per share to shareholders. Based on the last year's worth of payments, TowneBank stock has a trailing yield of around 3.3% on the current share price of $28.27. 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.

Check out our latest analysis for TowneBank

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately TowneBank's payout ratio is modest, at just 30% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, TowneBank's earnings per share have been growing at 18% 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. Since the start of our data, 10 years ago, TowneBank has lifted its dividend by approximately 11% 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.

The Bottom Line

Is TowneBank an attractive dividend stock, or better left on the shelf? Companies like TowneBank 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, TowneBank looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Curious what other investors think of TowneBank? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.