The board of Cortland Bancorp (NASDAQ:CLDB) has announced that it will pay a dividend on the 1st of September, with investors receiving US$0.15 per share. Based on this payment, the dividend yield will be 2.4%, which is fairly typical for the industry.
Cortland Bancorp's Earnings Easily Cover the Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Cortland Bancorp was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS could expand by 17.6% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.
Cortland Bancorp Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from US$0.12 in 2012 to the most recent annual payment of US$0.65. This means that it has been growing its distributions at 21% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Cortland Bancorp has seen EPS rising for the last five years, at 18% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like Cortland Bancorp's Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
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. For example, we've picked out 1 warning sign for Cortland Bancorp that investors should know about before committing capital to this 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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