Eastern Bankshares (NASDAQ:EBC) Has Affirmed Its Dividend Of $0.11

Eastern Bankshares, Inc. (NASDAQ:EBC) will pay a dividend of $0.11 on the 15th of December. This payment means that the dividend yield will be 3.9%, which is around the industry average.

View our latest analysis for Eastern Bankshares

Eastern Bankshares' 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.

Eastern Bankshares is just starting to establish itself as being able to pay dividends to shareholders, given its short 3-year history of distributing earnings. But while Eastern Bankshares was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company didn't have enough earnings to cover their dividends. This is an alarming sign for the sustainability of its dividends, as it may mean that Eastern Bankshares is pulling cash from elsewhere to keep its shareholders happy.

Looking forward, earnings per share is forecast by analysts to rise exponentially over the next 3 years. In addtion, they also estimate the future payout ratio could reach 32% in the same time period, which we would be comfortable to see continuing.

Eastern Bankshares Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 3 years was $0.24 in 2020, and the most recent fiscal year payment was $0.44. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Has Limited Growth Potential

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. Over the past three years, it looks as though Eastern Bankshares' EPS has declined at around 20% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Eastern Bankshares that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.