Unity Bancorp (NASDAQ:UNTY) Has Announced A Dividend Of $0.11

Unity Bancorp, Inc. (NASDAQ:UNTY) will pay a dividend of $0.11 on the 30th of December. This payment means the dividend yield will be 1.5%, which is below the average for the industry.

Our analysis indicates that UNTY is potentially undervalued!

Unity Bancorp's Dividend Forecasted To Be Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive.

Unity Bancorp has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Using data from its latest earnings report, Unity Bancorp's payout ratio sits at 11%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to expand by 19.3%. The future payout ratio could be 11% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Unity Bancorp Is Still Building Its Track Record

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 annual payment during the last 9 years was $0.0364 in 2013, and the most recent fiscal year payment was $0.44. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unity Bancorp has seen EPS rising for the last five years, at 23% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Unity Bancorp Looks Like A Great Dividend Stock

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. 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.

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. As an example, we've identified 1 warning sign for Unity Bancorp that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.