Valley National Bancorp (NASDAQ:VLY) Will Pay A Dividend Of $0.11
Valley National Bancorp (NASDAQ:VLY) will pay a dividend of $0.11 on the 2nd of April. The dividend yield will be 5.2% based on this payment which is still above the industry average.
See our latest analysis for Valley National Bancorp
Valley National Bancorp's Payment Expected To Have Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much.
Valley National Bancorp 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 Valley National Bancorp's payout ratio of 46% is a good sign as this means that earnings decently cover dividends.
The next 3 years are set to see EPS grow by 41.9%. Analysts forecast the future payout ratio could be 37% over the same time horizon, which is a number we think the company can maintain.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from $0.65 total annually to $0.44. Doing the maths, this is a decline of about 3.8% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend's Growth Prospects Are Limited
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings have grown at around 4.8% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 4.8% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
In Summary
Overall, we think Valley National Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Valley National Bancorp that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
