German American Bancorp's (NASDAQ:GABC) Upcoming Dividend Will Be Larger Than Last Year's

German American Bancorp, Inc. (NASDAQ:GABC) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of February to $0.29. The payment will take the dividend yield to 2.8%, which is in line with the average for the industry.

See our latest analysis for German American Bancorp

German American Bancorp's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

German American 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 German American Bancorp's payout ratio of 38% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 45.0% over the next 3 years. The future payout ratio could be 33% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

German American Bancorp 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 $0.427 in 2015 to the most recent total annual payment of $1.16. This means that it has been growing its distributions at 11% per annum 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

Investors could be attracted to the stock based on the quality of its payment history. However, German American Bancorp has only grown its earnings per share at 4.3% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

We Really Like German American Bancorp's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for German American Bancorp for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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