Stock Analysis

Community Bank System (NYSE:CBU) Is Increasing Its Dividend To US$0.43

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NYSE:CBU
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Community Bank System, Inc. (NYSE:CBU) has announced that it will be increasing its dividend on the 8th of October to US$0.43. The announced payment will take the dividend yield to 2.3%, which is in line with the average for the industry.

Check out our latest analysis for Community Bank System

Community Bank System's Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Community Bank System's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 7.1% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 55%, which we are pretty comfortable with and we think is feasible on an earnings basis.

historic-dividend
NYSE:CBU Historic Dividend September 3rd 2021

Community Bank System Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the dividend has gone from US$0.96 to US$1.72. This implies that the company grew its distributions at a yearly rate of about 6.0% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

We Could See Community Bank System's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see Community Bank System has been growing its earnings per share at 9.6% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Community Bank System Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Community Bank System is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. For example, we've picked out 1 warning sign for Community Bank System that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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