The board of Huntington Bancshares Incorporated (NASDAQ:HBAN) has announced that it will pay a dividend on the 2nd of January, with investors receiving $0.155 per share. Based on this payment, the dividend yield on the company's stock will be 6.5%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Huntington Bancshares

Huntington Bancshares' Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Huntington Bancshares has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Huntington Bancshares' payout ratio of 40% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to fall by 7.2%. Despite that, analysts estimate the future payout ratio could be 47% over the same time period, which is in a pretty comfortable range.

Huntington Bancshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.16, compared to the most recent full-year payment of $0.62. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 3.2% per year. Growth of 3.2% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.

Huntington Bancshares 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 generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.