Bank of the James Financial Group (NASDAQ:BOTJ) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy Bank of the James Financial Group, Inc. (NASDAQ:BOTJ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Bank of the James Financial Group's shares before the 1st of June in order to receive the dividend, which the company will pay on the 16th of June.

The company's upcoming dividend is US$0.08 a share, following on from the last 12 months, when the company distributed a total of US$0.32 per share to shareholders. Looking at the last 12 months of distributions, Bank of the James Financial Group has a trailing yield of approximately 3.6% on its current stock price of $8.95. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Bank of the James Financial Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bank of the James Financial Group 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.

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 Bank of the James Financial Group 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Bank of the James Financial Group has grown its earnings rapidly, up 26% 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, nine years ago, Bank of the James Financial Group has lifted its dividend by approximately 6.5% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Bank of the James Financial Group an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the 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. In summary, Bank of the James Financial Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Bank of the James Financial Group and you should be aware of them before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here