Important news for shareholders and potential investors in The Community Financial Corporation (NASDAQ:TCFC): The dividend payment of US$0.13 per share will be distributed to shareholders on 21 January 2019, and the stock will begin trading ex-dividend at an earlier date, 04 January 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Community Financial’s latest financial data to analyse its dividend characteristics.
See our latest analysis for Community Financial
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is its annual yield among the top 25% of dividend-paying companies?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share risen in the past couple of years?
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Can it afford to pay the current rate of dividends from its earnings?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Community Financial fit our criteria?
The current trailing twelve-month payout ratio for the stock is 31%, which means that the dividend is covered by earnings. However, going forward, analysts expect TCFC’s payout to fall to 15% of its earnings. Assuming a constant share price, this equates to a dividend yield of 1.5%. However, EPS should increase to $2.61, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. TCFC has increased its DPS from $0.40 to $0.50 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Community Financial has a yield of 1.7%, which is on the low-side for Banks stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Community Financial as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three key factors you should further examine: