Farmers National Banc Corp. (NASDAQ:FMNB) will pay a dividend of $0.17 on the 31st of December. Based on this payment, the dividend yield on the company's stock will be 4.3%, which is an attractive boost to shareholder returns.

See our latest analysis for Farmers National Banc

Farmers National Banc's Dividend Forecasted To Be Well Covered By Earnings

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

Farmers National Banc has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 55%, which means that Farmers National Banc would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 40.5%. Analysts estimate the future payout ratio will be 45% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Farmers National Banc Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.12 in 2014 to the most recent total annual payment of $0.68. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. 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.

Farmers National Banc May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Although it's important to note that Farmers National Banc's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

Overall, a consistent dividend is a good thing, and we think that Farmers National Banc 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. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.