Community Bank System (NYSE:CBU) Is Increasing Its Dividend To $0.45
Community Bank System, Inc. (NYSE:CBU) will increase its dividend from last year's comparable payment on the 10th of October to $0.45. This makes the dividend yield about the same as the industry average at 3.5%.
See our latest analysis for Community Bank System
Community Bank System's Payment Expected To Have Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Community Bank System 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 61%, which means that Community Bank System would be able to pay its last dividend without pressure on the balance sheet.
The next year is set to see EPS grow by 12.4%. If the dividend continues along recent trends, we estimate the future payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.
Community Bank System Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.08 in 2013, and the most recent fiscal year payment was $1.80. This means that it has been growing its distributions at 5.2% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth Is Doubtful
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Community Bank System's EPS has declined at around 5.1% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 6 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is Community Bank System 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.
