German American Bancorp, Inc.'s (NASDAQ:GABC) dividend will be increasing from last year's payment of the same period to $0.31 on 20th of February. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.

German American Bancorp's Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

German American Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on German American Bancorp's last earnings report, the payout ratio is at a decent 39%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 44.6% over the next 3 years. Analysts forecast the future payout ratio could be 32% over the same time horizon, which is a number we think the company can maintain.

German American 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 $0.453 in 2016, and the most recent fiscal year payment was $1.24. This means that it has been growing its distributions at 11% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

We Could See German American Bancorp's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that German American Bancorp has grown earnings per share at 5.1% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

An additional note is that the company has been raising capital by issuing stock equal to 26% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

German American Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Is German American Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.