Unity Bancorp (NASDAQ:UNTY) Will Pay A Dividend Of $0.11

The board of Unity Bancorp, Inc. (NASDAQ:UNTY) has announced that it will pay a dividend of $0.11 per share on the 30th of December. Including this payment, the dividend yield on the stock will be 1.6%, which is a modest boost for shareholders' returns.

Check out the opportunities and risks within the US Banks industry.

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.

Having distributed dividends for at least 10 years, Unity Bancorp has a long history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Unity Bancorp's latest earnings report puts its payout ratio at 11%, showing that the company can pay out its dividends comfortably.

The next 3 years are set to see EPS grow by 19.3%. Analysts estimate the future payout ratio will be 11% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Unity Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the annual payment back then was $0.0364, compared to the most recent full-year payment of $0.44. This means that it has been growing its distributions at 28% per annum 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unity Bancorp has seen EPS rising for the last five years, at 23% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Unity Bancorp's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on Unity Bancorp management tenure, salary, and performance. Is Unity Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.