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Independent Bank's (NASDAQ:IBCP) Shareholders Will Receive A Bigger Dividend Than Last Year
The board of Independent Bank Corporation (NASDAQ:IBCP) has announced that it will be paying its dividend of $0.23 on the 15th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.2%, which shareholders will be pleased with.
See our latest analysis for Independent Bank
Independent Bank's Payment Expected To Have Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
Independent Bank has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Independent Bank's latest earnings report puts its payout ratio at 24%, showing that the company can pay out its dividends comfortably.
EPS is set to fall by 3.6% over the next 12 months. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 39%, which would be comfortable for the company to continue in the future.
Independent Bank Is Still Building Its Track Record
Independent Bank's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2014, the dividend has gone from $0.24 total annually to $0.92. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Independent Bank has seen EPS rising for the last five years, at 20% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
We Really Like Independent Bank's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Independent Bank you should be aware of, and 1 of them doesn't sit too well with us. 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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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.
About NasdaqGS:IBCP
Independent Bank
Operates as the bank holding company for Independent Bank that provides commercial banking services to individuals and businesses in rural and suburban communities in Michigan.
Flawless balance sheet with solid track record and pays a dividend.