Community Bank System (NYSE:CBU) Is Increasing Its Dividend To $0.45
Community Bank System, Inc. (NYSE:CBU) has announced that it will be increasing its periodic dividend on the 10th of October to $0.45, which will be 2.3% higher than last year's comparable payment amount of $0.44. Based on this payment, the dividend yield for the company will be 3.5%, which is fairly typical for the industry.
Check out 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.
Having distributed dividends for at least 10 years, Community Bank System has a long history of paying out a part of its earnings to shareholders. Based on Community Bank System's last earnings report, the payout ratio is at a decent 64%, 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 13.4%. If the dividend continues along recent trends, we estimate the future payout ratio will be 60%, which is in the range that makes us comfortable with the sustainability of the dividend.
Community Bank System Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.08 in 2013 to the most recent total annual payment of $1.76. This means that it has been growing its distributions at 5.0% 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.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. It's not great to see that Community Bank System's earnings per share has fallen at approximately 3.5% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. 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.
Our Thoughts On Community Bank System's Dividend
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. 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.
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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 7 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.
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