Auburn National Bancorporation (NASDAQ:AUBN) Has Announced A Dividend Of $0.265

The board of Auburn National Bancorporation, Inc. (NASDAQ:AUBN) has announced that it will pay a dividend on the 27th of December, with investors receiving $0.265 per share. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.

Our analysis indicates that AUBN is potentially undervalued!

Auburn National Bancorporation's Payment Expected To Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Having distributed dividends for at least 10 years, Auburn National Bancorporation has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Auburn National Bancorporation's payout ratio of 48% is a good sign as this means that earnings decently cover dividends.

Unless the company can turn things around, EPS could fall by 0.09% over the next year. Assuming the dividend continues along recent trends, we believe the future payout ratio could be 49%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Auburn National Bancorporation Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the annual payment back then was $0.82, compared to the most recent full-year payment of $1.06. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

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. However, things aren't all that rosy. Auburn National Bancorporation hasn't seen much change in its earnings per share over the last five years.

In Summary

Overall, we think Auburn National Bancorporation is a solid choice as a dividend stock, even though the dividend wasn't raised this year. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Auburn National Bancorporation (of which 1 is concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.