Dime Community Bancshares (NASDAQ:DCOM) Will Pay A Dividend Of $0.25

Dime Community Bancshares, Inc. (NASDAQ:DCOM) has announced that it will pay a dividend of $0.25 per share on the 24th of July. This makes the dividend yield 5.1%, which will augment investor returns quite nicely.

Check out our latest analysis for Dime Community Bancshares

Dime Community Bancshares' Payment Expected To Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having distributed dividends for at least 10 years, Dime Community Bancshares has a long history of paying out a part of its earnings to shareholders. Based on Dime Community Bancshares' last earnings report, the payout ratio is at a decent 56%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 26.0%. If the dividend continues on this path, the future payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Dime Community Bancshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $0.864 total annually to $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 1.5% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Dime Community Bancshares has seen earnings per share falling at 2.8% 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. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

Overall, a consistent dividend is a good thing, and we think that Dime Community Bancshares has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Dime Community Bancshares that investors need to be conscious of moving forward. 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.

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