The board of ConnectOne Bancorp, Inc. (NASDAQ:CNOB) has announced that it will pay a dividend of $0.18 per share on the 2nd of December. This means the dividend yield will be fairly typical at 2.9%.

See our latest analysis for ConnectOne Bancorp

ConnectOne Bancorp's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, ConnectOne Bancorp has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but ConnectOne Bancorp's payout ratio of 41% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 103.6% over the next 3 years. Analysts forecast the future payout ratio could be 25% over the same time horizon, which is a number we think the company can maintain.

ConnectOne 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 an annual total of $0.30 in 2014 to the most recent total annual payment of $0.72. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. ConnectOne Bancorp has seen earnings per share falling at 3.4% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, we think ConnectOne Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 4 analysts are forecasting a turnaround in our free collection of analyst estimates here. If you are a dividend investor, you might also want to look at our curated list of high yield 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.