The board of Salisbury Bancorp, Inc. (NASDAQ:SAL) has announced that it will be increasing its dividend on the 27th of August to US$0.31. This takes the annual payment to 2.5% of the current stock price, which is about average for the industry.
Salisbury Bancorp's Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Salisbury Bancorp's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 5.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.
Salisbury Bancorp Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from US$1.12 in 2011 to the most recent annual payment of US$1.20. Dividend payments have grown at less than 1% a year over this period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see Salisbury Bancorp has been growing its earnings per share at 16% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like Salisbury Bancorp'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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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. Are management backing themselves to deliver performance? Check their shareholdings in Salisbury Bancorp in our latest insider ownership analysis. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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