Unity Bancorp (NASDAQ:UNTY) Is Paying Out A Larger Dividend Than Last Year

Unity Bancorp, Inc. (NASDAQ:UNTY) has announced that it will be increasing its dividend from last year's comparable payment on the 19th of September to $0.15. This takes the annual payment to 1.1% of the current stock price, which unfortunately is below what the industry is paying.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Unity Bancorp's Payment Expected To Have Solid Earnings Coverage

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 with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 11% also shows that Unity Bancorp is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to rise by 6.5% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Unity Bancorp

Unity Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from $0.109 total annually to $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

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 impressed us by growing EPS at 19% per year over the past five years. 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, a dividend increase is always good, and we think that Unity Bancorp is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Unity Bancorp for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.