A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Dime Community Bancshares, Inc. (NASDAQ:DCOM) has paid a dividend to shareholders. It currently yields 3.1%. Let’s dig deeper into whether Dime Community Bancshares should have a place in your portfolio.
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5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does Dime Community Bancshares fare?
The company currently pays out 39% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 44% which, assuming the share price stays the same, leads to a dividend yield of 3.1%. However, EPS is forecasted to fall to $1.27 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. DCOM investors will be well aware the dividend payments are lower today than they were 10 years ago, although the payments have at least been steady. However, income investors that value stability over growth may still find DCOM appealing.
Compared to its peers, Dime Community Bancshares has a yield of 3.1%, which is on the low-side for Mortgage stocks.
With these dividend metrics in mind, I definitely rank Dime Community Bancshares as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for DCOM’s future growth? Take a look at our free research report of analyst consensus for DCOM’s outlook.
- Valuation: What is DCOM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether DCOM is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.