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Camden National Corporation (NASDAQ:CAC) has announced that it will pay a dividend of $0.42 per share on the 30th of April. The dividend yield will be 4.1% based on this payment which is still above the industry average.
Camden National's Payment Expected To Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Camden National has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 46%, which means that Camden National would be able to pay its last dividend without pressure on the balance sheet.
The next 3 years are set to see EPS grow by 58.2%. Analysts estimate the future payout ratio will be 35% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Camden National
Camden National Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from $0.72 total annually to $1.68. This means that it has been growing its distributions at 8.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Camden National has seen earnings per share falling at 3.2% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
We should note that Camden National has issued stock equal to 16% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
In Summary
Overall, a consistent dividend is a good thing, and we think that Camden National has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.