TowneBank (NASDAQ:TOWN) Will Pay A Larger Dividend Than Last Year At $0.25
TowneBank (NASDAQ:TOWN) will increase its dividend on the 14th of July to $0.25, which is 8.7% higher than last year's payment from the same period of $0.23. This makes the dividend yield about the same as the industry average at 3.8%.
See our latest analysis for TowneBank
TowneBank's Payment Expected To Have Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much.
TowneBank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 37%, which means that TowneBank would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, earnings per share is forecast to fall by 1.4% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 42%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
TowneBank Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.32, compared to the most recent full-year payment of $0.92. This means that it has been growing its distributions at 11% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
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. TowneBank has impressed us by growing EPS at 12% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like TowneBank's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for TowneBank (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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