Arrow Financial's (NASDAQ:AROW) Dividend Will Be Increased To $0.29

Arrow Financial Corporation (NASDAQ:AROW) will increase its dividend from last year's comparable payment on the 25th of August to $0.29. This takes the dividend yield to 4.3%, which shareholders will be pleased with.

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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.

Arrow Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Arrow Financial's last earnings report, the payout ratio is at a decent 61%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to rise by 30.4% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could be 49% by next year, which is in a pretty sustainable range.

See our latest analysis for Arrow Financial

Arrow Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was $0.759, compared to the most recent full-year payment of $1.16. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Arrow Financial May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. It's not great to see that Arrow Financial's earnings per share has fallen at approximately 3.4% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Arrow Financial's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Arrow Financial in our latest insider ownership analysis. Is Arrow Financial 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.