Arrow Financial (NASDAQ:AROW) Is Due To Pay A Dividend Of $0.27

The board of Arrow Financial Corporation (NASDAQ:AROW) has announced that it will pay a dividend on the 15th of December, with investors receiving $0.27 per share. This payment means that the dividend yield will be 4.8%, which is around the industry average.

View our latest analysis for Arrow Financial

Arrow Financial's Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Arrow Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Arrow Financial's payout ratio of 52% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 65.6%. Analysts estimate the future payout ratio will be 42% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Arrow Financial Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $0.744 total annually to $1.05. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Arrow Financial hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Arrow Financial's Dividend

Overall, we think Arrow Financial is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Now, if you want to look closer, it would be worth checking out our free research on Arrow Financial management tenure, salary, and performance. Is Arrow Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.