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Is Evans Bancorp, Inc. (NYSEMKT:EVBN) A Smart Pick For Income Investors?

Michael Canly

There is a lot to be liked about Evans Bancorp, Inc. (NYSEMKT:EVBN) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 2.8% to shareholders, making it a relatively attractive dividend stock. Let’s dig deeper into whether Evans Bancorp should have a place in your portfolio.

Check out our latest analysis for Evans Bancorp

Here’s how I find good dividend stocks

When researching a dividend stock, I always follow the following screening criteria:

  • Is it paying an annual yield above 75% of dividend payers?

  • Has it paid dividend every year without dramatically reducing payout in the past?

  • Has the amount of dividend per share grown over the past?

  • Is its earnings sufficient to payout dividend at the current rate?

  • Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

AMEX:EVBN Historical Dividend Yield December 19th 18
AMEX:EVBN Historical Dividend Yield December 19th 18

How well does Evans Bancorp fit our criteria?

Evans Bancorp has a trailing twelve-month payout ratio of 34%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect EVBN’s payout to fall to 24% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.8%. However, EPS should increase to $3.55, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of EVBN it has increased its DPS from $0.82 to $0.92 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes EVBN a true dividend rockstar.

Relative to peers, Evans Bancorp generates a yield of 2.8%, which is on the low-side for Banks stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Evans Bancorp as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important factors you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for EVBN’s future growth? Take a look at our free research report of analyst consensus for EVBN’s outlook.

  2. Valuation: What is EVBN worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether EVBN is currently mispriced by the market.

  3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.