Unity Bancorp (NASDAQ:UNTY) Has Affirmed Its Dividend Of US$0.09

Unity Bancorp, Inc.'s (NASDAQ:UNTY) investors are due to receive a payment of US$0.09 per share on 24th of September. The dividend yield is 1.5% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Unity Bancorp

Unity Bancorp's Payment Has 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. However, prior to this announcement, Unity Bancorp's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 4.2%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

Unity Bancorp Doesn't Have A Long Payment History

Unity Bancorp'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. The first annual payment during the last 8 years was US$0.036 in 2013, and the most recent fiscal year payment was US$0.36. This implies that the company grew its distributions at a yearly rate of about 33% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Unity Bancorp has seen EPS rising for the last five years, at 17% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Unity Bancorp's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Unity Bancorp (1 shouldn't be ignored!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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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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