The board of Auburn National Bancorporation, Inc. (NASDAQ:AUBN) has announced that it will pay a dividend of $0.265 per share on the 26th of September. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.
Auburn National Bancorporation's Earnings Will Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.
Auburn National Bancorporation has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 48%, which means that Auburn National Bancorporation would be able to pay its last dividend without pressure on the balance sheet.
Unless the company can turn things around, EPS could fall by 0.02% over the next year. Assuming the dividend continues along recent trends, we believe the future payout ratio could be 50%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Auburn National Bancorporation Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.80 in 2012 to the most recent total annual payment of $1.06. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Auburn National Bancorporation May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Auburn National Bancorporation hasn't seen much change in its earnings per share over the last five years.
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Auburn National Bancorporation has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.
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