Heritage Commerce (NASDAQ:HTBK) Is Paying Out A Dividend Of $0.13

Heritage Commerce Corp (NASDAQ:HTBK) has announced that it will pay a dividend of $0.13 per share on the 23rd of May. The dividend yield will be 6.4% based on this payment which is still above the industry average.

Check out our latest analysis for Heritage Commerce

Heritage Commerce's Payment Expected To Have Solid Earnings Coverage

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

Heritage Commerce 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 Heritage Commerce's payout ratio of 57% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 6.3% 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 67%, which would be comfortable for the company to continue in the future.

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 2014 to the most recent total annual 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.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Heritage Commerce's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Heritage Commerce is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

We Really Like Heritage Commerce's Dividend

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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Heritage Commerce that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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