U.S. Markets closed

Valley National Bancorp (NASDAQ:VLY)'s Could Be A Buy For Its Upcoming Dividend

Simply Wall St

Valley National Bancorp (NASDAQ:VLY) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 12th of September in order to receive the dividend, which the company will pay on the 1st of October.

Valley National Bancorp's upcoming dividend is US$0.11 a share, following on from the last 12 months, when the company distributed a total of US$0.44 per share to shareholders. Calculating the last year's worth of payments shows that Valley National Bancorp has a trailing yield of 4.2% on the current share price of $10.4. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Valley National Bancorp can afford its dividend, and if the dividend could grow.

View our latest analysis for Valley National Bancorp

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Valley National Bancorp paid out a comfortable 45% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqGS:VLY Historical Dividend Yield, September 7th 2019

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Valley National Bancorp earnings per share are up 8.1% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Valley National Bancorp's dividend payments per share have declined at 3.9% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Is Valley National Bancorp worth buying for its dividend? Valley National Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, Valley National Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Curious what other investors think of Valley National Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.