Lombard Bank Malta (MTSE:LOM) Is Increasing Its Dividend To €0.034

Lombard Bank Malta p.l.c. (MTSE:LOM) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of July to €0.034. Based on this payment, the dividend yield for the company will be 4.5%, which is fairly typical for the industry.

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Lombard Bank Malta's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Lombard Bank Malta has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Lombard Bank Malta's payout ratio of 47% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS could fall by 6.2% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the future payout ratio could be 49%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Lombard Bank Malta

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was €0.0181, compared to the most recent full-year payment of €0.034. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Lombard Bank Malta has seen earnings per share falling at 6.2% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Lombard Bank Malta's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Lombard Bank Malta has been making. We don't think Lombard Bank Malta is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Lombard Bank Malta you should be aware of, and 1 of them can't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield 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.