Unity Bancorp (NASDAQ:UNTY) Will Pay A Larger Dividend Than Last Year At $0.12

Unity Bancorp, Inc. (NASDAQ:UNTY) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of June to $0.12. Even though the dividend went up, the yield is still quite low at only 2.1%.

See 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.

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 12%, showing that the company can pay out its dividends comfortably.

Looking forward, earnings per share is forecast to rise by 0.8% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2013, the annual payment back then was $0.0364, compared to the most recent full-year payment of $0.48. This means that it has been growing its distributions at 29% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Unity Bancorp has been growing its earnings per share at 23% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

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. However, there are other things to consider for investors when analysing stock performance. 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. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.