Unity Bancorp's (NASDAQ:UNTY) Upcoming Dividend Will Be Larger Than Last Year's

Unity Bancorp, Inc.'s (NASDAQ:UNTY) periodic dividend will be increasing on the 28th of March to $0.14, with investors receiving 7.7% more than last year's $0.13. Even though the dividend went up, the yield is still quite low at only 1.1%.

See our latest analysis for Unity Bancorp

Unity Bancorp's Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Unity Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, Unity Bancorp's payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to expand by 47.5%. Analysts forecast the future payout ratio could be 11% over the same time horizon, which is a number we think the company can maintain.

Unity Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.0727 total annually to $0.52. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

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. Unity Bancorp has seen EPS rising for the last five years, at 14% per annum. Unity Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Unity Bancorp Looks Like A Great Dividend Stock

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. All of these factors considered, we think this has solid potential as a dividend 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. Taking the debate a bit further, we've identified 1 warning sign for Unity Bancorp that investors need to be conscious of moving forward. Is Unity Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.