Community West Bancshares (NASDAQ:CWBC) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Community West Bancshares' shares before the 2nd of August in order to be eligible for the dividend, which will be paid on the 16th of August.

The company's next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.48 to shareholders. Based on the last year's worth of payments, Community West Bancshares has a trailing yield of 2.4% on the current stock price of US$20.20. If you buy this business for its dividend, you should have an idea of whether Community West Bancshares's dividend is reliable and sustainable. So we need to investigate whether Community West Bancshares can afford its dividend, and if the dividend could grow.

View our latest analysis for Community West Bancshares

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Community West Bancshares is paying out an acceptable 67% of its profit, a common payout level among most companies.

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?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Community West Bancshares's earnings per share have fallen at approximately 20% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Community West Bancshares has lifted its dividend by approximately 9.1% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

From a dividend perspective, should investors buy or avoid Community West Bancshares? We're not overly enthused to see Community West Bancshares's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

Although, if you're still interested in Community West Bancshares and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 3 warning signs for Community West Bancshares that we strongly recommend you have a look at before investing in the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com