The board of Chemung Financial Corporation (NASDAQ:CHMG) has announced that it will be increasing its dividend by 3.2% on the 1st of April to $0.32, up from last year's comparable payment of $0.31. This takes the annual payment to 2.4% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Chemung Financial

Chemung Financial's Dividend Forecasted To Be Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Having distributed dividends for at least 10 years, Chemung Financial has a long history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Chemung Financial's latest earnings report puts its payout ratio at 25%, showing that the company can pay out its dividends comfortably.

The next 3 years are set to see EPS grow by 38.5%. Analysts estimate the future payout ratio will be 20% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Chemung Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $1.04 in 2015, and the most recent fiscal year payment was $1.24. This means that it has been growing its distributions at 1.8% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Chemung Financial has seen EPS rising for the last five years, at 9.2% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Chemung Financial's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Chemung Financial analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.