Independent Bank Corporation (NASDAQ:IBCP) has announced that it will pay a dividend of $0.24 per share on the 15th of August. This means that the annual payment will be 2.8% of the current stock price, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Independent Bank's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Independent Bank

Independent Bank's Dividend Forecasted To Be Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Independent Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 31%, which means that Independent Bank would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 0.3%. If the dividend continues on this path, the future payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Independent Bank Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.24 in 2014 to the most recent total annual payment of $0.96. This implies that the company grew its distributions at a yearly rate of about 15% 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.

The Dividend Looks Likely To Grow

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 Independent Bank has grown earnings per share at 12% per year over the past five years. Independent Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Independent Bank Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.