Independent Bank (NASDAQ:INDB) Has Announced That It Will Be Increasing Its Dividend To $0.55

Independent Bank Corp. (NASDAQ:INDB) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of January to $0.55. This takes the annual payment to 2.3% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Independent Bank

Independent Bank's Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having distributed dividends for at least 10 years, Independent Bank has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 48%, which means that Independent Bank would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 54.6%. The future payout ratio could be 30% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Independent Bank 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. Since 2012, the dividend has gone from $0.76 total annually to $2.04. This means that it has been growing its distributions at 10% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

We Could See Independent Bank's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Independent Bank has seen EPS rising for the last five years, at 6.3% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We should note that Independent Bank has issued stock equal to 38% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Independent Bank Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Independent Bank that investors should know about before committing capital to this stock. Is Independent Bank 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.