Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that John Marshall Bancorp, Inc. (NASDAQ:JMSB) is about to go ex-dividend in just 3 days. 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. Accordingly, John Marshall Bancorp investors that purchase the stock on or after the 28th of June will not receive the dividend, which will be paid on the 8th of July.

The company's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$0.22 per share. Last year's total dividend payments show that John Marshall Bancorp has a trailing yield of 1.5% on the current share price of US$16.45. If you buy this business for its dividend, you should have an idea of whether John Marshall Bancorp's dividend is reliable and sustainable. As a result, readers should always check whether John Marshall Bancorp has been able to grow its dividends, or if the dividend might be cut.

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. John Marshall Bancorp paid out 102% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

Click here to see how much of its profit John Marshall Bancorp paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by John Marshall Bancorp's 26% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Unfortunately John Marshall Bancorp has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Has John Marshall Bancorp got what it takes to maintain its dividend payments? Earnings per share are in decline and John Marshall Bancorp is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that being said, if you're still considering John Marshall Bancorp as an investment, you'll find it beneficial to know what risks this stock is facing. For example - John Marshall Bancorp has 1 warning sign we think you should be aware of.

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.

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