Auburn National Bancorporation (NASDAQ:AUBN) Will Pay A Dividend Of US$0.26

Auburn National Bancorporation, Inc. (NASDAQ:AUBN) will pay a dividend of US$0.26 on the 27th of September. This makes the dividend yield 3.0%, 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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Auburn National Bancorporation was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share could rise by 1.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Auburn National Bancorporation Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the first annual payment was US$0.78, compared to the most recent full-year payment of US$1.04. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately, Auburn National Bancorporation's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.2% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Auburn National Bancorporation's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Auburn National Bancorporation's payments, as there could be some issues with sustaining them into the future. 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.

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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Auburn National Bancorporation stock. 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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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.
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