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Community Bank System, Inc. (NYSE:CBU) will increase its dividend on the 8th of October to US$0.43. Based on the announced payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.
Community Bank System's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Community Bank System's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
EPS is set to fall by 7.1% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 55%, which is comfortable for the company to continue in the future.
Community Bank System Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from US$0.96 in 2011 to the most recent annual payment of US$1.72. This means that it has been growing its distributions at 6.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Community Bank System Could Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. Community Bank System has impressed us by growing EPS at 9.6% per 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.
Community Bank System Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Community Bank System is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Community Bank System that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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