LCNB Corp. (NASDAQ:LCNB) has announced that it will pay a dividend of $0.22 per share on the 17th of March. Based on this payment, the dividend yield on the company's stock will be 5.9%, which is an attractive boost to shareholder returns.

Check out our latest analysis for LCNB

LCNB'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, LCNB has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but LCNB's payout ratio of 90% is a good sign as this means that earnings decently cover dividends.

The next 3 years are set to see EPS grow by 104.7%. For the same time horizon, analysts estimate that the future payout ratio could be 50% which would be quite comfortable going to take the dividend forward.

LCNB 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 $0.64 in 2015 to the most recent total annual payment of $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Come By

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 LCNB's earnings per share has fallen at approximately 7.9% 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. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for LCNB that investors need to be conscious of moving forward. Is LCNB not quite the opportunity you were looking for? Why not check out our selection of top 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.