VersaBank's (TSE:VBNK) Dividend Will Be CA$0.025

The board of VersaBank (TSE:VBNK) has announced that it will pay a dividend on the 30th of April, with investors receiving CA$0.025 per share. The dividend yield is 1.0% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for VersaBank

VersaBank's Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

VersaBank has a good history of paying out dividends, with its current track record at 5 years. While past data isn't a guarantee for the future, VersaBank's latest earnings report puts its payout ratio at 11%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS is forecast to expand by 32.5%. If the dividend continues on this path, the future payout ratio could be 9.6% by next year, which we think can be pretty sustainable going forward.

VersaBank Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 5 years was CA$0.04 in 2018, and the most recent fiscal year payment was CA$0.10. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. VersaBank has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. VersaBank has seen EPS rising for the last five years, at 17% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for VersaBank's prospects of growing its dividend payments in the future.

VersaBank Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for VersaBank that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.