ACNB Corporation's (NASDAQ:ACNB) dividend will be increasing from last year's payment of the same period to $0.34 on 12th of June. This takes the annual payment to 3.1% of the current stock price, which is about average for the industry.

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ACNB's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

ACNB has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but ACNB's payout ratio of 46% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to expand by 28.3%. If the dividend continues along recent trends, we estimate the future payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for ACNB

ACNB Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.76 total annually to $1.36. This means that it has been growing its distributions at 6.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, ACNB's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 1.1% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

We should note that ACNB has issued stock equal to 23% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like ACNB's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.