The board of ConnectOne Bancorp, Inc. (NASDAQ:CNOB) has announced that it will pay a dividend on the 3rd of March, with investors receiving $0.18 per share. This payment means that the dividend yield will be 2.7%, which is around the industry average.

See our latest analysis for ConnectOne Bancorp

ConnectOne Bancorp's Dividend Forecasted To Be Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

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.

The next 3 years are set to see EPS grow by 141.6%. Analysts estimate the future payout ratio will be 23% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

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 annual payment during the last 10 years was $0.30 in 2015, and the most recent fiscal year payment was $0.72. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

ConnectOne Bancorp May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. It's not great to see that ConnectOne Bancorp's earnings per share has fallen at approximately 3.1% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 3 analysts we track are forecasting for the future. 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.