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Community Trust Bancorp, Inc. (NASDAQ:CTBI) has announced that it will be increasing its periodic dividend on the 1st of October to $0.44, which will be 10.0% higher than last year's comparable payment amount of $0.40. This makes the dividend yield 3.7%, which is above the industry average.
Community Trust Bancorp's Earnings Will Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
Community Trust Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Community Trust Bancorp's last earnings report, the payout ratio is at a decent 35%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, earnings per share is forecast to fall by 2.2% over the next year. But if the dividend continues along recent trends, we estimate the future payout ratio could be 39%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.
Community Trust Bancorp Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.13 in 2012 to the most recent total annual payment of $1.60. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Looks Likely To Grow
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 Community Trust Bancorp has been growing its earnings per share at 11% a year over the past five years. Community Trust Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Community Trust Bancorp'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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Community Trust Bancorp that investors need to be conscious of moving forward. Is Community Trust Bancorp 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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