ACNB (NASDAQ:ACNB) Is Increasing Its Dividend To $0.34

The board of ACNB Corporation (NASDAQ:ACNB) has announced that the dividend on 12th of June will be increased to $0.34, which will be 6.3% higher than last year's payment of $0.32 which covered the same period. This makes the dividend yield about the same as the industry average at 3.1%.

We've discovered 2 warning signs about ACNB. View them for free.

ACNB's Dividend Forecasted To Be Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time.

ACNB has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 34%, which means that ACNB would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 29.3%. If the dividend continues along recent trends, we estimate the future payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for ACNB

ACNB Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was $0.76, compared to the most recent full-year payment of $1.28. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

ACNB May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately, ACNB's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, ACNB could always pay out a higher proportion of earnings to increase shareholder returns.

We should note that ACNB has issued stock equal to 23% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

ACNB Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that ACNB is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. As an example, we've identified 2 warning signs for ACNB that you should be aware of before investing. Is ACNB 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.