Heritage Commerce's (NASDAQ:HTBK) Dividend Will Be $0.13

Heritage Commerce Corp (NASDAQ:HTBK) has announced that it will pay a dividend of $0.13 per share on the 23rd of May. This makes the dividend yield 6.4%, which will augment investor returns quite nicely.

See our latest analysis for Heritage Commerce

Heritage Commerce'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.

Heritage Commerce has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Heritage Commerce's payout ratio of 57% is a good sign as this means that earnings decently cover dividends.

EPS is set to fall by 6.3% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 67%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

historic-dividend

Heritage Commerce 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 $0.12 in 2014 to the most recent total annual payment of $0.52. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately, Heritage Commerce's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.1% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. 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.

We Really Like Heritage Commerce's Dividend

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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Heritage Commerce that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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