Colony Bankcorp's (NASDAQ:CBAN) Dividend Will Be $0.1075

The board of Colony Bankcorp, Inc. (NASDAQ:CBAN) has announced that it will pay a dividend of $0.1075 per share on the 18th of November. This payment means that the dividend yield will be 3.2%, which is around the industry average.

Our analysis indicates that CBAN is potentially undervalued!

Colony Bankcorp's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having paid out dividends for 6 years, Colony Bankcorp has a good history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 38%shows that Colony Bankcorp would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 70.2% over the next 3 years. The future payout ratio could be 26% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Colony Bankcorp Is Still Building Its Track Record

It is great to see that Colony Bankcorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the dividend has gone from $0.10 total annually to $0.43. This means that it has been growing its distributions at 28% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Although it's important to note that Colony Bankcorp's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

An additional note is that the company has been raising capital by issuing stock equal to 29% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Colony Bankcorp has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Colony Bankcorp that investors should take into consideration. 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.