ChoiceOne Financial Services' (NASDAQ:COFS) Upcoming Dividend Will Be Larger Than Last Year's

The board of ChoiceOne Financial Services, Inc. (NASDAQ:COFS) has announced that it will be paying its dividend of $0.27 on the 29th of December, an increased payment from last year's comparable dividend. This takes the annual payment to 4.0% of the current stock price, which is about average for the industry.

View our latest analysis for ChoiceOne Financial Services

ChoiceOne Financial Services' Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Having distributed dividends for at least 10 years, ChoiceOne Financial Services has a long history of paying out a part of its earnings to shareholders. Based on ChoiceOne Financial Services' last earnings report, the payout ratio is at a decent 35%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 0.7% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 38%, which would be comfortable for the company to continue in the future.

ChoiceOne Financial Services Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.472 in 2013 to the most recent total annual payment of $1.08. This means that it has been growing its distributions at 8.6% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See ChoiceOne Financial Services' Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. ChoiceOne Financial Services has impressed us by growing EPS at 9.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for ChoiceOne Financial Services' prospects of growing its dividend payments in the future.

We Really Like ChoiceOne Financial Services' 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 generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for ChoiceOne Financial Services that investors need to be conscious of moving forward. Is ChoiceOne Financial Services 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.