Enterprise Bancorp (NASDAQ:EBTC) Is Paying Out A Dividend Of $0.24

The board of Enterprise Bancorp, Inc. (NASDAQ:EBTC) has announced that it will pay a dividend on the 3rd of June, with investors receiving $0.24 per share. Based on this payment, the dividend yield on the company's stock will be 3.9%, which is an attractive boost to shareholder returns.

See our latest analysis for Enterprise Bancorp

Enterprise Bancorp's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Enterprise Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 30%, which means that Enterprise Bancorp would be able to pay its last dividend without pressure on the balance sheet.

If the trend of the last few years continues, EPS will grow by 4.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 31% by next year, which is in a pretty sustainable range.

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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 an annual total of $0.46 in 2014 to the most recent total annual payment of $0.96. This means that it has been growing its distributions at 7.6% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 4.8% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Enterprise Bancorp could always pay out a higher proportion of earnings to increase shareholder returns.

We Really Like Enterprise Bancorp's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 1 warning sign for Enterprise Bancorp that you should be aware of before investing. 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.