Auburn National Bancorporation, Inc. (NASDAQ:AUBN) has announced that it will pay a dividend of $0.27 per share on the 25th of March. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Auburn National Bancorporation

Auburn National Bancorporation's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Auburn National Bancorporation has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Auburn National Bancorporation's last earnings report, the payout ratio is at a decent 59%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS could fall by 7.6% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 65%, which is definitely feasible to continue.

Auburn National Bancorporation Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $0.86, compared to the most recent full-year payment of $1.08. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Auburn National Bancorporation's EPS has declined at around 7.6% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, a consistent dividend is a good thing, and we think that Auburn National Bancorporation has the ability to continue this into the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Auburn National Bancorporation has 2 warning signs (and 1 which is significant) we think you should know about. 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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