Heritage Commerce (NASDAQ:HTBK) Is Due To Pay A Dividend Of $0.13

The board of Heritage Commerce Corp (NASDAQ:HTBK) has announced that it will pay a dividend on the 21st of November, with investors receiving $0.13 per share. This means the annual payment is 6.3% of the current stock price, which is above the average for the industry.

View our latest analysis for Heritage Commerce

Heritage Commerce's Dividend Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Heritage Commerce has a long history of paying out a part of its earnings to shareholders. Based on Heritage Commerce's last earnings report, the payout ratio is at a decent 44%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 16.1% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 51% over the same time period, which we think the company can easily maintain.

Heritage Commerce Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.12, compared to the most recent full-year payment of $0.52. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Heritage Commerce has impressed us by growing EPS at 15% 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.

Heritage Commerce Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Heritage Commerce might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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 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. For example, we've picked out 1 warning sign for Heritage Commerce that investors should know about before committing capital to this stock. 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.