Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see LINKBANCORP, Inc. (NASDAQ:LNKB) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase LINKBANCORP's shares before the 30th of August to receive the dividend, which will be paid on the 16th of September.

The company's next dividend payment will be US$0.075 per share. Last year, in total, the company distributed US$0.30 to shareholders. Last year's total dividend payments show that LINKBANCORP has a trailing yield of 4.6% on the current share price of US$6.48. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether LINKBANCORP can afford its dividend, and if the dividend could grow.

Check out our latest analysis for LINKBANCORP

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. LINKBANCORP reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. LINKBANCORP was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. LINKBANCORP's dividend payments are effectively flat on where they were two years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Remember, you can always get a snapshot of LINKBANCORP's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is LINKBANCORP worth buying for its dividend? It's hard to get past the idea of LINKBANCORP paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that in mind though, if the poor dividend characteristics of LINKBANCORP don't faze you, it's worth being mindful of the risks involved with this business. To that end, you should learn about the 2 warning signs we've spotted with LINKBANCORP (including 1 which doesn't sit too well with us).

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.