Enterprise Bancorp's (NASDAQ:EBTC) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Enterprise Bancorp, Inc. (NASDAQ:EBTC) has announced that it will be increasing its dividend by 12% on the 1st of March to $0.23, up from last year's comparable payment of $0.205. Even though the dividend went up, the yield is still quite low at only 2.3%.

View our latest analysis for Enterprise Bancorp

Enterprise Bancorp's Dividend Forecasted To Be Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end.

Having distributed dividends for at least 10 years, Enterprise Bancorp has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 23% also shows that Enterprise Bancorp is able to comfortably pay dividends.

If the trend of the last few years continues, EPS will grow by 12.9% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 23%, 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 2013, the dividend has gone from $0.44 total annually to $0.82. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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. Enterprise Bancorp has impressed us by growing EPS at 13% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Enterprise Bancorp's Dividend

Overall, a dividend increase is always good, and we think that Enterprise Bancorp is a strong income stock thanks to its track record and growing earnings. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Enterprise Bancorp that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection 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.