Enterprise Bancorp's (NASDAQ:EBTC) Upcoming Dividend Will Be Larger Than Last Year's

The board of Enterprise Bancorp, Inc. (NASDAQ:EBTC) has announced that it will be increasing its dividend on the 1st of March to US$0.20. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.

View our latest analysis for Enterprise Bancorp

Enterprise Bancorp's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Enterprise Bancorp's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 15.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.

Enterprise Bancorp Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from US$0.42 in 2012 to the most recent annual payment of US$0.82. This means that it has been growing its distributions at 6.9% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Enterprise Bancorp has seen EPS rising for the last five years, at 16% per annum. 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.

Enterprise Bancorp 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on Enterprise Bancorp management tenure, salary, and performance. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.