Yahoo Finance Here's Why We're Wary Of Buying New York Community Bancorp, Inc.'s (NYSE:NYCB) For Its Upcoming Dividend
New York Community Bancorp, Inc. (NYSE:NYCB) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 7th of February to receive the dividend, which will be paid on the 24th of February.
New York Community Bancorp's next dividend payment will be US$0.17 per share. Last year, in total, the company distributed US$0.68 to shareholders. Based on the last year's worth of payments, New York Community Bancorp stock has a trailing yield of around 6.1% on the current share price of $11.06. If you buy this business for its dividend, you should have an idea of whether New York Community Bancorp's dividend is reliable and sustainable. So we need to investigate whether New York Community Bancorp can afford its dividend, and if the dividend could grow.
Check out our latest analysis for New York Community Bancorp
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. It paid out 87% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see New York Community Bancorp's earnings per share have dropped 6.6% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. New York Community Bancorp's dividend payments per share have declined at 3.8% per year on average over the past ten years, which is uninspiring. 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.
Final Takeaway
Should investors buy New York Community Bancorp for the upcoming dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
Wondering what the future holds for New York Community Bancorp? See what the 12 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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