The board of C&F Financial Corporation (NASDAQ:CFFI) has announced that it will pay a dividend of $0.44 per share on the 1st of July. Based on this payment, the dividend yield on the company's stock will be 3.9%, which is an attractive boost to shareholder returns.

Check out our latest analysis for C&F Financial

C&F Financial's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

C&F Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but C&F Financial's payout ratio of 29% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS could expand by 3.7% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 29% by next year, which is in a pretty sustainable range.

C&F Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.16 in 2014 to the most recent total annual payment of $1.76. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 3.7% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, C&F Financial has the option to increase the payout ratio to return more cash to shareholders.

C&F Financial Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in C&F Financial in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.