Auburn National Bancorporation (NASDAQ:AUBN) Has Announced A Dividend Of US$0.26

The board of Auburn National Bancorporation, Inc. (NASDAQ:AUBN) has announced that it will pay a dividend on the 27th of September, with investors receiving US$0.26 per share. This makes the dividend yield 3.1%, which will augment investor returns quite nicely.

Check out our latest analysis for Auburn National Bancorporation

Auburn National Bancorporation's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Auburn National Bancorporation's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS could expand by 1.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Auburn National Bancorporation Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$0.78 in 2011, and the most recent fiscal year payment was US$1.04. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Auburn National Bancorporation May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Auburn National Bancorporation hasn't seen much change in its earnings per share over the last five years. Auburn National Bancorporation is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Auburn National Bancorporation's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Auburn National Bancorporation is earning enough to cover the payments, the cash flows are lacking. We don't think Auburn National Bancorporation is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Auburn National Bancorporation management tenure, salary, and performance. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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