Why It Might Not Make Sense To Buy Berkshire Hills Bancorp, Inc. (NYSE:BHLB) For Its Upcoming Dividend
It looks like Berkshire Hills Bancorp, Inc. (NYSE:BHLB) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 16th of December in order to be eligible for this dividend, which will be paid on the 29th of December.
Berkshire Hills Bancorp's upcoming dividend is US$0.12 a share, following on from the last 12 months, when the company distributed a total of US$0.48 per share to shareholders. Last year's total dividend payments show that Berkshire Hills Bancorp has a trailing yield of 2.5% on the current share price of $18.86. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Berkshire Hills Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Berkshire Hills Bancorp lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Berkshire Hills Bancorp was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Berkshire Hills Bancorp has seen its dividend decline 2.8% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Remember, you can always get a snapshot of Berkshire Hills Bancorp's financial health, by checking our visualisation of its financial health, here.
To Sum It Up
Should investors buy Berkshire Hills Bancorp for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
Although, if you're still interested in Berkshire Hills Bancorp and want to know more, you'll find it very useful to know what risks this stock faces. Case in point: We've spotted 2 warning signs for Berkshire Hills Bancorp you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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