Colony Bankcorp's (NASDAQ:CBAN) Upcoming Dividend Will Be Larger Than Last Year's

Colony Bankcorp, Inc. (NASDAQ:CBAN) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of February to $0.1125. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Colony Bankcorp's stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Colony Bankcorp

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

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Having paid out dividends for 7 years, Colony Bankcorp has a good history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Colony Bankcorp's payout ratio of 36% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 39.0%. Analysts forecast the future payout ratio could be 28% over the same time horizon, which is a number we think the company can maintain.

Colony Bankcorp Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 7 years was $0.10 in 2017, and the most recent fiscal year payment was $0.45. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. Colony Bankcorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. It's not great to see that Colony Bankcorp's earnings per share has fallen at approximately 2.6% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Colony Bankcorp's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Colony Bankcorp is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Colony Bankcorp that you should be aware of before investing. Is Colony Bankcorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.