Community Financial System's (NYSE:CBU) Dividend Will Be Increased To $0.46

The board of Community Financial System, Inc. (NYSE:CBU) has announced that the dividend on 10th of October will be increased to $0.46, which will be 2.2% higher than last year's payment of $0.45 which covered the same period. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Community Financial System's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Community Financial System

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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Community Financial System has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Community Financial System's last earnings report, the payout ratio is at a decent 57%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to expand by 6.5%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 57% by next year, which is in a pretty sustainable range.

Community Financial System Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $1.12, compared to the most recent full-year payment of $1.80. This implies that the company grew its distributions at a yearly rate of about 4.9% 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.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Community Financial System hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Community Financial System's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 6 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is Community Financial System 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.

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