Unity Bancorp (NASDAQ:UNTY) Has Announced A Dividend Of $0.12

Unity Bancorp, Inc.'s (NASDAQ:UNTY) investors are due to receive a payment of $0.12 per share on 22nd of September. This payment means the dividend yield will be 1.9%, which is below the average for the industry.

View our latest analysis for Unity Bancorp

Unity Bancorp'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.

Unity Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past data isn't a guarantee for the future, Unity Bancorp's latest earnings report puts its payout ratio at 12%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS is forecast to fall by 0.4%. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 14%, which would be comfortable for the company to continue in the future.

Unity Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.0364 total annually to $0.48. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

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 that Unity Bancorp has been growing its earnings per share at 20% 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 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 generating plenty of cash, and the earnings also quite easily cover the distributions. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Unity Bancorp that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.