Elmira Savings Bank's (NASDAQ:ESBK) investors are due to receive a payment of US$0.15 per share on 10th of September. This means the annual payment is 4.3% of the current stock price, which is above the average for the industry.
View our latest analysis for Elmira Savings Bank
Elmira Savings Bank's Earnings Easily Cover the Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Elmira Savings Bank's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS could expand by 3.6% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.
Elmira Savings Bank Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was US$0.60 in 2011, and the most recent fiscal year payment was US$0.60. Dividend payments have been growing, but very slowly over the period. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 3.6% a year for the past five years, which isn't massive but still better than seeing them shrink. Elmira Savings Bank is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
Elmira Savings Bank Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Elmira Savings Bank 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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