Burke & Herbert Financial Services' (NASDAQ:BHRB) Dividend Will Be $0.53

The board of Burke & Herbert Financial Services Corp. (NASDAQ:BHRB) has announced that it will pay a dividend on the 3rd of September, with investors receiving $0.53 per share. This means the dividend yield will be fairly typical at 3.1%.

Check out our latest analysis for Burke & Herbert Financial Services

Burke & Herbert Financial Services' Dividend Forecasted To Be Well Covered By Earnings

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

Burke & Herbert Financial Services has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. This is an alarming sign for the sustainability of its dividends, as it may mean that Burke & Herbert Financial Servicesis pulling cash from elsewhere to keep its shareholders happy.

Analysts expect a massive rise in earnings per share in the next 3 years. Additionally, they estimate future payout ratio will be 31% over the same time horizon, which makes us pretty comfortable with the sustainability of the dividend.

Burke & Herbert Financial Services Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.85 in 2014, and the most recent fiscal year payment was $2.12. This implies that the company grew its distributions at a yearly rate of about 1.4% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings per share has been crawling upwards at 2.5% per year. Burke & Herbert Financial Services isn't actually turning a profit, which makes it much harder for us to see how they can grow dividends.

An additional note is that the company has been raising capital by issuing stock equal to 101% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Burke & Herbert Financial Services' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Burke & Herbert Financial Services' payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Burke & Herbert Financial Services (of which 1 is potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com