Unity Bancorp (NASDAQ:UNTY) Will Pay A Dividend Of $0.12

Unity Bancorp, Inc. (NASDAQ:UNTY) will pay a dividend of $0.12 on the 22nd of September. This payment means the dividend yield will be 2.0%, which is below the average for the industry.

Check out our latest analysis for Unity Bancorp

Unity Bancorp's Payment Expected To Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end.

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 12% also shows that Unity Bancorp is able to comfortably pay dividends.

EPS is set to fall by 0.4% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 14%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Unity Bancorp Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.0364 in 2013 to the most recent total annual payment of $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 29% 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

Investors could be attracted to the stock based on the quality of its payment 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 like to see the dividend staying consistent, and we think Unity Bancorp might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Unity Bancorp (of which 1 is significant!) you should know about. 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.