Yahoo Finance Eastern Bankshares (NASDAQ:EBC) Could Be A Buy For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Eastern Bankshares, Inc. (NASDAQ:EBC) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Eastern Bankshares' shares before the 2nd of March to receive the dividend, which will be paid on the 15th of March.
The company's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Calculating the last year's worth of payments shows that Eastern Bankshares has a trailing yield of 1.9% on the current share price of $20.83. If you buy this business for its dividend, you should have an idea of whether Eastern Bankshares's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Eastern Bankshares
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. Fortunately Eastern Bankshares's payout ratio is modest, at just 33% of profit.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why we're optimistic about Eastern Bankshares's earnings, which have ripped higher, up 579% over the past year. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far.
One year is not very long in the grand scheme of things though, so we wouldn't draw too strong a conclusion based on these results.
We'd also point out that Eastern Bankshares issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Unfortunately Eastern Bankshares has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
To Sum It Up
From a dividend perspective, should investors buy or avoid Eastern Bankshares? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Eastern Bankshares looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while Eastern Bankshares looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Eastern Bankshares that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
