Bryn Mawr Bank Corporation (NASDAQ:BMTC) has pleased shareholders over the past 10 years, by paying out dividends. The company is currently worth US$723m, and now yields roughly 2.8%. Let’s dig deeper into whether Bryn Mawr Bank should have a place in your portfolio.
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5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Bryn Mawr Bank fit our criteria?
The company currently pays out 44% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect BMTC’s payout to fall to 31% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.0%. However, EPS should increase to $3.3, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering 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.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of BMTC it has increased its DPS from $0.56 to $1 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes BMTC a true dividend rockstar.
In terms of its peers, Bryn Mawr Bank generates a yield of 2.8%, which is on the low-side for Banks stocks.
With these dividend metrics in mind, I definitely rank Bryn Mawr Bank 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three key aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for BMTC’s future growth? Take a look at our free research report of analyst consensus for BMTC’s outlook.
- Valuation: What is BMTC 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 BMTC 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.