Farmers National Banc (NASDAQ:FMNB) Has Affirmed Its Dividend Of $0.17

The board of Farmers National Banc Corp. (NASDAQ:FMNB) has announced that it will pay a dividend on the 28th of June, with investors receiving $0.17 per share. This means the annual payment is 5.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Farmers National Banc

Farmers National Banc's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Farmers National Banc has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 47%, which means that Farmers National Banc would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 6.2% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 60%, which would be comfortable for the company to continue in the future.

Farmers National Banc Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.12 in 2014 to the most recent total annual payment of $0.68. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 3.7% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 3.7% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Farmers National Banc Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Farmers National Banc that you should be aware of before investing. Is Farmers National Banc not quite the opportunity you were looking for? Why not check out our selection of top 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.