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

Dime Community Bancshares, Inc.'s (NASDAQ:DCOM) investors are due to receive a payment of $0.25 per share on 24th of January. This payment means that the dividend yield will be 3.2%, which is around the industry average.

See our latest analysis for Dime Community Bancshares

Dime Community Bancshares' Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

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 67%, meaning that the company is able to pay out its dividend with a bit of room to spare.

According to analysts, EPS should be several times higher in the next 3 years. Additionally, they estimate future payout ratio will be 28% over the same time horizon, which makes us pretty comfortable with the sustainability of the dividend.

Dime Community Bancshares Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.864 in 2014, and the most recent fiscal year payment was $1.00. This means that it has been growing its distributions at 1.5% per annum over that time. 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 Come By

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Dime Community Bancshares' earnings per share has shrunk at approximately 5.9% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

An additional note is that the company has been raising capital by issuing stock equal to 12% 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.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. 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. For example, we've picked out 2 warning signs for Dime Community Bancshares that investors should know about before committing capital to this stock. Is Dime Community Bancshares not quite the opportunity you were looking for? Why not check out our selection of top 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.