Arrow Financial's (NASDAQ:AROW) Dividend Will Be $0.27

The board of Arrow Financial Corporation (NASDAQ:AROW) has announced that it will pay a dividend of $0.27 per share on the 15th of September. The dividend yield will be 6.2% based on this payment which is still above the industry average.

Check out our latest analysis for Arrow Financial

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

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Arrow Financial has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Arrow Financial's payout ratio of 46% is a good sign as this means that earnings decently cover dividends.

The next year is set to see EPS grow by 5.7%. If the dividend continues on this path, the future payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Arrow Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.766, compared to the most recent full-year payment of $1.08. 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.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 2.3% per year. The company has been growing at a pretty soft 2.3% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

Arrow Financial 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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on Arrow Financial management tenure, salary, and performance. If you are a dividend investor, you might also want to look at our curated list of high yield 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.