Enterprise Bancorp (NASDAQ:EBTC) Is Due To Pay A Dividend Of $0.24

The board of Enterprise Bancorp, Inc. (NASDAQ:EBTC) has announced that it will pay a dividend of $0.24 per share on the 2nd of December. This means the dividend yield will be fairly typical at 2.9%.

View our latest analysis for Enterprise Bancorp

Enterprise Bancorp's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Enterprise Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Enterprise Bancorp's payout ratio of 32% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share could rise by 2.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the future payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Enterprise Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.48, compared to the most recent full-year payment of $0.96. This means that it has been growing its distributions at 7.2% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 2.0% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Enterprise Bancorp could always pay out a higher proportion of earnings to increase shareholder returns.

Enterprise Bancorp Looks Like A Great Dividend Stock

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in Enterprise Bancorp stock. Is Enterprise Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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