Community Trust Bancorp's (NASDAQ:CTBI) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Community Trust Bancorp, Inc. (NASDAQ:CTBI) has announced that it will be increasing its dividend on the 1st of January to US$0.40. This takes the dividend yield to 3.5%, which shareholders will be pleased with.

See our latest analysis for Community Trust Bancorp

Community Trust Bancorp's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Community Trust Bancorp's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 16.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 42%, which is comfortable for the company to continue in the future.

Community Trust Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$1.11 in 2011, and the most recent fiscal year payment was US$1.60. This means that it has been growing its distributions at 3.7% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Community Trust Bancorp has impressed us by growing EPS at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Community Trust Bancorp's prospects of growing its dividend payments in the future.

We Really Like Community Trust Bancorp's Dividend

Overall, a dividend increase is always good, and we think that Community Trust Bancorp is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Community Trust Bancorp that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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.

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