TowneBank's (NASDAQ:TOWN) Shareholders Will Receive A Bigger Dividend Than Last Year
TowneBank (NASDAQ:TOWN) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of July to $0.25. This takes the annual payment to 4.0% of the current stock price, which is about average for the industry.
Check out our latest analysis for TowneBank
TowneBank's Dividend Forecasted To Be Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time.
Having distributed dividends for at least 10 years, TowneBank has a long history of paying out a part of its 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 4.2% over the next year. But if the dividend continues along recent trends, we estimate the future payout ratio could be 44%, 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.
TowneBank Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.311 in 2013, and the most recent fiscal year payment was $1.00. This means that it has been growing its distributions at 12% 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
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that TowneBank has been growing its earnings per share at 12% a 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.
TowneBank Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. For example, we've identified 2 warning signs for TowneBank (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is TowneBank 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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