Central Valley Community Bancorp (NASDAQ:CVCY) Has Announced That It Will Be Increasing Its Dividend To US$0.12

Central Valley Community Bancorp's (NASDAQ:CVCY) dividend will be increasing to US$0.12 on 25th of February. This makes the dividend yield about the same as the industry average at 2.1%.

Check out our latest analysis for Central Valley Community Bancorp

Central Valley Community Bancorp's Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Central Valley Community Bancorp's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 16.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 28%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Central Valley Community Bancorp's Dividend Has Lacked Consistency

Central Valley Community Bancorp has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2013, the dividend has gone from US$0.20 to US$0.48. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Central Valley Community Bancorp has seen EPS rising for the last five years, at 12% per annum. Central Valley Community Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Central Valley Community Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Central Valley Community 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. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Central Valley Community Bancorp (1 is significant!) that you should be aware of before investing. 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.