Eastern Bankshares (NASDAQ:EBC) Is Increasing Its Dividend To $0.11

Eastern Bankshares, Inc. (NASDAQ:EBC) will increase its dividend from last year's comparable payment on the 15th of December to $0.11. This makes the dividend yield about the same as the industry average at 3.5%.

View our latest analysis for Eastern Bankshares

Eastern Bankshares' Dividend Forecasted To Be Well Covered By Earnings

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. Past distributions unfortunately do not guarantee future ones, and Eastern Bankshares' last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is worrying for investors as it points to Eastern Bankshares' dividends being unsustainable in the long term.

Analysts expect a massive rise in earnings per share in the next 3 years. They also estimate that the future payout ratio will be 32% in the same time horizon, so there isn't too much pressure on the dividend.

Eastern Bankshares Is Still Building Its Track Record

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. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past three years, it looks as though Eastern Bankshares' EPS has declined at around 21% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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 becomes a long term trend.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Eastern Bankshares' payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Eastern Bankshares that investors should take into consideration. 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.