Isabella Bank Corporation (NASDAQ:ISBA) will pay a dividend of $0.28 on the 30th of June. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Isabella Bank's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Isabella Bank has a long history of paying out a part of its earnings to shareholders. Based on Isabella Bank'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 15.7%. If the dividend continues on this path, the future payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Isabella Bank

Isabella 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. Since 2015, the dividend has gone from $0.88 total annually to $1.12. This implies that the company grew its distributions at a yearly rate of about 2.4% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

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. Earnings have grown at around 4.6% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 4.6% 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.

Isabella Bank Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.