Codorus Valley Bancorp's (NASDAQ:CVLY) Upcoming Dividend Will Be Larger Than Last Year's

Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) will increase its dividend on the 14th of February to $0.16, which is 6.7% higher than last year's payment from the same period of $0.15. This makes the dividend yield about the same as the industry average at 2.5%.

See our latest analysis for Codorus Valley Bancorp

Codorus Valley Bancorp's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

Codorus Valley Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Codorus Valley Bancorp's payout ratio of 38% is a good sign as this means that earnings decently cover dividends.

If the trend of the last few years continues, EPS will grow by 1.1% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

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Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from $0.244 total annually to $0.60. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Codorus Valley Bancorp might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Codorus Valley Bancorp's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While growth may be thin on the ground, Codorus Valley Bancorp could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Codorus Valley Bancorp's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Codorus Valley Bancorp has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. 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.

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