The advice of Auburn National Bancorporation, Inc. (NASDAQ: AUBN) has announced that it will pay a dividend of $ 0.26 per share on June 25. Based on this payment, the dividend yield on the shares of the company will be 2.7%, which is an attractive increase in returns for shareholders.
Check out our latest review for Auburn National Bancorporation
Auburn National Bancorporation dividend well covered by earnings
While it’s great to have a strong dividend yield, we also need to determine if the payout is sustainable. Prior to making this announcement, Auburn National Bancorporation was earning enough to cover the dividend, but it was not generating free cash flow. The lack of cash flow could certainly make it difficult to return money to shareholders, or at least mean that the balance sheet will be under pressure.
Unless the company can turn things around, EPS could drop 0.9% over the next year. If the dividend holds according to recent trends, we estimate the payout ratio could be 50%, which we consider to be quite comfortable, with most of the company profit remaining to grow the business in the future. .
Auburn National Bancorporation has a strong track record
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2011, the first annual payment was US $ 0.78, compared to the most recent annual payment of US $ 1.04. This implies that the company has increased its distributions at an annual rate of approximately 2.9% over that period. Slow, steady dividend growth may not sound so exciting, but dividends have been stable for the past decade, which we think makes this a pretty attractive offer.
Prospects for dividend growth are limited
Investors in the company will be happy to receive dividends for some time. Let’s not jump to conclusions, because things might not be as good as they appear on the surface. While it’s important to note that Auburn National Bancorporation’s earnings per share have barely increased from what they were five years ago, which could erode the purchasing power of the dividend in the over time.
Our thoughts on the Auburn National Bancorporation dividend
In summary, while it is good to see that the dividend has not been reduced, we are a little cautious about Auburn National Bancorporation payments, as there could be issues maintaining them going forward. While the low payout ratio is a feature of redemption, this is offset by the minimum amount of money to cover the payouts. Overall, we don’t think this company has the makings of a good income stock.
Companies with a stable dividend policy are likely to benefit from greater investor interest than those with a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they aren’t the only factors our readers should be aware of when valuing a business. See if management has its own wealth at stake, by checking out insider holdings in shares of Auburn National Bancorporation. We have also set up a list of global stocks with a solid dividend.
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