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

Heritage Commerce Corp's (NASDAQ:HTBK) investors are due to receive a payment of $0.13 per share on 21st of November. This means the annual payment is 5.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Heritage Commerce

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

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

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 74%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 14.4%. The future payout ratio could be 69% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Heritage Commerce Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.16 in 2014, and the most recent fiscal year payment was $0.52. This implies that the company grew its distributions at a yearly rate of about 13% 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 Come By

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Heritage Commerce's EPS has declined at around 8.8% 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Heritage Commerce's Dividend

Overall, a consistent dividend is a good thing, and we think that Heritage Commerce has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 6 analysts we track are forecasting for the future. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.