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Salisbury Bancorp, Inc. (NASDAQ:SAL) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy Salisbury Bancorp, Inc. (NASDAQ:SAL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 13th of August, you won't be eligible to receive this dividend, when it is paid on the 28th of August.

Salisbury Bancorp's next dividend payment will be US$0.29 per share, on the back of last year when the company paid a total of US$1.16 to shareholders. Last year's total dividend payments show that Salisbury Bancorp has a trailing yield of 3.1% on the current share price of $36.86. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View 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. That's why it's good to see Salisbury Bancorp paying out a modest 30% of its earnings.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Salisbury Bancorp's earnings have been skyrocketing, up 24% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Salisbury Bancorp's dividend payments are broadly unchanged compared to where they were 10 years ago.

The Bottom Line

Should investors buy Salisbury Bancorp for the upcoming dividend? Companies like Salisbury Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Salisbury Bancorp more closely.

While it's tempting to invest in Salisbury Bancorp for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Salisbury Bancorp that we recommend you consider before investing in the business.

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.

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. 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.

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