Heritage Commerce (NASDAQ:HTBK) Has Announced A Dividend Of $0.13

The board of Heritage Commerce Corp (NASDAQ:HTBK) has announced that it will pay a dividend on the 25th of May, with investors receiving $0.13 per share. This means the annual payment is 6.4% of the current stock price, which is above the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Heritage Commerce's stock price has reduced by 33% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Heritage Commerce

Heritage Commerce's Earnings Will Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Heritage Commerce 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 43%, which means that Heritage Commerce would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to fall by 3.4%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 48%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Heritage Commerce Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.12 in 2013 to the most recent total annual payment of $0.52. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Heritage Commerce has grown earnings per share at 12% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Heritage Commerce's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. However, there are other things to consider for investors when analysing stock performance. To that end, Heritage Commerce has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Heritage Commerce 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.