Community Trust Bancorp, Inc. (NASDAQ:CTBI) has announced that it will be increasing its periodic dividend on the 1st of October to $0.44, which will be 10.0% higher than last year's comparable payment amount of $0.40. This makes the dividend yield 3.7%, which is above the industry average.

See our latest analysis for Community Trust Bancorp

Community Trust Bancorp's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Community Trust Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Community Trust Bancorp's last earnings report, the payout ratio is at a decent 35%, 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 fall by 2.2% over the next year. But if the dividend continues along recent trends, we estimate the future payout ratio could be 39%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Community Trust Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.13 in 2012 to the most recent total annual payment of $1.60. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Community Trust Bancorp has been growing its earnings per share at 11% a year over the past five years. Community Trust Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Community Trust Bancorp's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.