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The board of Unity Bancorp, Inc. (NASDAQ:UNTY) has announced that the dividend on 28th of March will be increased to $0.14, which will be 7.7% higher than last year's payment of $0.13 which covered the same period. Although the dividend is now higher, the yield is only 1.1%, which is below the industry average.
View our latest analysis for Unity Bancorp
Unity Bancorp's Dividend Forecasted To Be Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Unity Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Using data from its latest earnings report, Unity Bancorp's payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.
The next 3 years are set to see EPS grow by 47.5%. Analysts estimate the future payout ratio will be 11% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Unity Bancorp Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.0727 in 2015, and the most recent fiscal year payment was $0.52. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Unity Bancorp has been growing its earnings per share at 14% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like Unity 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. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Unity Bancorp that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.