Colony Bankcorp's (NASDAQ:CBAN) Dividend Will Be Increased To US$0.11

Colony Bankcorp, Inc.'s (NASDAQ:CBAN) dividend will be increasing on the 18th of February to US$0.11, with investors receiving 4.9% more than last year. Based on the announced payment, the dividend yield for the company will be 2.4%, which is fairly typical for the industry.

See our latest analysis for Colony Bankcorp

Colony Bankcorp's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Colony Bankcorp was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 15.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Colony Bankcorp Doesn't Have A Long Payment History

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 2017, the first annual payment was US$0.10, compared to the most recent full-year payment of US$0.41. This works out to be a compound annual growth rate (CAGR) of approximately 33% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

We Could See Colony Bankcorp's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Colony Bankcorp has been growing its earnings per share at 9.9% a year over the past five years. Colony Bankcorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

The company has also been raising capital by issuing stock equal to 44% 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.

We Really Like Colony Bankcorp's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.