Heritage Commerce's (NASDAQ:HTBK) Dividend Will Be $0.13

Heritage Commerce Corp (NASDAQ:HTBK) will pay a dividend of $0.13 on the 22nd of August. This means the annual payment is 4.9% 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. Investors will be pleased to see that Heritage Commerce's stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Heritage Commerce

Heritage Commerce's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Heritage Commerce has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Heritage Commerce's last earnings report, the payout ratio is at a decent 66%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 1.4% over the next 12 months. But if the dividend continues along recent trends, we estimate the future payout ratio could be 73%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Heritage Commerce Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $0.12 total annually to $0.52. This means that it has been growing its distributions at 16% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Heritage Commerce's EPS has declined at around 7.1% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Heritage Commerce's Dividend

Overall, we think Heritage Commerce is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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.

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