German American Bancorp (NASDAQ:GABC) Is Paying Out A Larger Dividend Than Last Year

German American Bancorp, Inc.'s (NASDAQ:GABC) dividend will be increasing from last year's payment of the same period to $0.25 on 20th of May. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.

View our latest analysis for German American Bancorp

German American 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.

German American Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on German American Bancorp's last earnings report, the payout ratio is at a decent 30%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 1.6% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 34%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

German American Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $0.373, compared to the most recent full-year payment of $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. German American Bancorp has impressed us by growing EPS at 11% per year over the past five years. German American Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

German American Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for German American Bancorp that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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