Fidelity D & D Bancorp (NASDAQ:FDBC) Is Paying Out A Larger Dividend Than Last Year

Fidelity D & D Bancorp, Inc. (NASDAQ:FDBC) will increase its dividend on the 10th of December to $0.40, which is 5.3% higher than last year's payment from the same period of $0.38. This takes the annual payment to 2.9% of the current stock price, which is about average for the industry.

Check out our latest analysis for Fidelity D & D Bancorp

Fidelity D & D Bancorp's Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Fidelity D & D 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 Fidelity D & D Bancorp's payout ratio of 56% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS could fall by 2.8% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 64%, which is definitely feasible to continue.

Fidelity D & D Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.667 in 2014, and the most recent fiscal year payment was $1.52. 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.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Fidelity D & D Bancorp's EPS has declined at around 2.8% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Fidelity D & D Bancorp's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Fidelity D & D Bancorp that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.