Community Financial System (NYSE:CBU) Is Increasing Its Dividend To $0.47

Community Financial System, Inc. (NYSE:CBU) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of October to $0.47. The payment will take the dividend yield to 3.7%, which is in line with the average for the industry.

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Community Financial System's Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Having distributed dividends for at least 10 years, Community Financial System has a long history of paying out a part of its earnings to shareholders. Based on Community Financial System's last earnings report, the payout ratio is at a decent 50%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to rise by 17.7% over the next year. If the dividend continues on this path, the future payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Community Financial System

Community Financial System Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was $1.20, compared to the most recent full-year payment of $1.88. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Community Financial System May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Community Financial System has only grown its earnings per share at 4.0% per annum over the past five years. Growth of 4.0% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like Community Financial System's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 Community Financial System analysts we track are forecasting continued growth with our free report on 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.