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It looks like Brookline Bancorp, Inc. (NASDAQ:BRKL) is about to go ex-dividend in the next four days. If you purchase the stock on or after the 11th of February, you won't be eligible to receive this dividend, when it is paid on the 26th of February.
Brookline Bancorp's next dividend payment will be US$0.12 per share. Last year, in total, the company distributed US$0.46 to shareholders. Looking at the last 12 months of distributions, Brookline Bancorp has a trailing yield of approximately 3.6% on its current stock price of $12.87. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Brookline Bancorp can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 76% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Brookline Bancorp's earnings per share have been shrinking at 3.2% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Brookline Bancorp has lifted its dividend by approximately 3.1% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Brookline Bancorp is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
The Bottom Line
Is Brookline Bancorp an attractive dividend stock, or better left on the shelf? We're not overly enthused to see Brookline Bancorp's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Brookline Bancorp doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Brookline Bancorp. Our analysis shows 3 warning signs for Brookline Bancorp and you should be aware of these before buying any shares.
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.
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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