ChoiceOne Financial Services, Inc. (NASDAQ:COFS) has announced that it will be increasing its periodic dividend on the 30th of December to $0.26, which will be 4.0% higher than last year's comparable payment amount of $0.25. This will take the dividend yield to an attractive 4.1%, providing a nice boost to shareholder returns.
ChoiceOne Financial Services' Earnings Will Easily Cover The Distributions
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, ChoiceOne Financial Services has a long history of paying out a part of its earnings to shareholders. Based on ChoiceOne Financial Services' last earnings report, the payout ratio is at a decent 34%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, earnings per share could rise by 10.3% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the future payout ratio could be 34% by next year, which is in a pretty sustainable range.
ChoiceOne Financial Services Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from $0.435 total annually to $1.00. This means that it has been growing its distributions at 8.7% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. ChoiceOne Financial Services has impressed us by growing EPS at 10% per year over the past five years. ChoiceOne Financial Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
ChoiceOne Financial Services Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Are management backing themselves to deliver performance? Check their shareholdings in ChoiceOne Financial Services in our latest insider ownership analysis. Is ChoiceOne Financial Services not quite the opportunity you were looking for? Why not check out our selection of top 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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