Eastern Bankshares (NASDAQ:EBC) Is Increasing Its Dividend To $0.11
Eastern Bankshares, Inc. (NASDAQ:EBC) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of December to $0.11. This takes the annual payment to 3.8% of the current stock price, which is about average for the industry.
View our latest analysis for Eastern Bankshares
Eastern Bankshares' Dividend Forecasted To Be Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much.
Eastern Bankshares is just starting to establish itself as being able to pay dividends to shareholders, given its short 3-year history of distributing earnings. While Eastern Bankshares' efforts to pay out a dividend can be applauded, its latest earnings report actually shows that the company didn't have enough earnings in the year to cover its dividends. This is an alarming sign that could mean that Eastern Bankshares' dividend may no longer be sustainable for longer.
Looking forward, earnings per share is forecast by analysts to rise exponentially over the next 3 years. They also estimate that the future payout ratio will be 32% in the same time horizon, so there isn't too much pressure on the dividend.
Eastern Bankshares Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2020, the dividend has gone from $0.24 total annually to $0.44. This means that it has been growing its distributions at 22% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Has Limited Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Earnings per share has been sinking by 21% over the last three years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Eastern Bankshares' Dividend Doesn't Look Sustainable
Overall, we always like to see the dividend being raised, but we don't think Eastern Bankshares will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Eastern Bankshares is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Eastern Bankshares that investors need to be conscious of moving forward. Is Eastern Bankshares 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.
