Bank of Marin Bancorp (NASDAQ:BMRC) Will Pay A Dividend Of US$0.24

The board of Bank of Marin Bancorp (NASDAQ:BMRC) has announced that it will pay a dividend of US$0.24 per share on the 13th of May. This payment means that the dividend yield will be 3.2%, which is around the industry average.

See our latest analysis for Bank of Marin Bancorp

Bank of Marin Bancorp's Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Bank of Marin Bancorp's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 18.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

Bank of Marin Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from US$0.34 in 2012 to the most recent annual payment of US$0.96. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Bank of Marin Bancorp May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Bank of Marin Bancorp has only grown its earnings per share at 3.8% per annum over the past five years. The company has been growing at a pretty soft 3.8% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

The company has also been raising capital by issuing stock equal to 20% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Bank of Marin Bancorp Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Bank of Marin Bancorp might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Bank of Marin Bancorp that investors should take into consideration. Is Bank of Marin Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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