The board of Colony Bankcorp, Inc. (NASDAQ:CBAN) has announced that it will pay a dividend on the 23rd of February, with investors receiving $0.11 per share. This means the dividend yield will be fairly typical at 3.4%.

See our latest analysis for Colony Bankcorp

Colony Bankcorp's Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Colony Bankcorp has a good history of paying out dividends, with its current track record at 6 years. Taking data from its last earnings report, calculating for the company's payout ratio of 38%shows that Colony Bankcorp would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 37.7% over the next 3 years. Analysts estimate the future payout ratio will be 31% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Colony Bankcorp Is Still Building Its Track Record

It is great to see that Colony Bankcorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the dividend has gone from $0.10 total annually to $0.44. This means that it has been growing its distributions at 28% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Colony Bankcorp May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, Colony Bankcorp has only grown its earnings per share at 4.4% per annum over the past five years. While growth may be thin on the ground, Colony Bankcorp could always pay out a higher proportion of earnings to increase shareholder returns.

We should note that Colony Bankcorp has issued stock equal to 28% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

Overall, a consistent dividend is a good thing, and we think that Colony Bankcorp has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Colony Bankcorp that investors should know about before committing capital to this stock. Is Colony Bankcorp 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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