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The board of TowneBank (NASDAQ:TOWN) has announced that it will be increasing its dividend by 8.0% on the 11th of July to $0.27, up from last year's comparable payment of $0.25. The payment will take the dividend yield to 2.8%, which is in line with the average for the industry.
We check all companies for important risks. See what we found for TowneBank in our free report.
TowneBank's Payment Expected To Have Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.
Having distributed dividends for at least 10 years, TowneBank has a long history of paying out a part of its earnings to shareholders. Based on TowneBank's last earnings report, the payout ratio is at a decent 42%, meaning that the company is able to pay out its dividend with a bit of room to spare.
The next year is set to see EPS grow by 22.9%. If the dividend continues along recent trends, we estimate the future payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for TowneBank
TowneBank Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.44 in 2015 to the most recent total annual payment of $1.00. This means that it has been growing its distributions at 8.6% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
We Could See TowneBank's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that TowneBank has been growing its earnings per share at 5.5% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
We Really Like TowneBank's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 TowneBank analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is TowneBank not quite the opportunity you were looking for? Why not check out our selection of top 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.