Eastern Bankshares (NASDAQ:EBC) Will Pay A Dividend Of $0.10

Eastern Bankshares, Inc.'s (NASDAQ:EBC) investors are due to receive a payment of $0.10 per share on 15th of September. This means that the annual payment will be 3.0% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Eastern Bankshares

Eastern Bankshares' Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Eastern Bankshares has a short history of paying out dividends, with its current track record at only 3 years. While Eastern Bankshares' efforts to pay out a dividend can be applauded, its latest earnings report actually shows that the company didn't have enough earnings in the year to cover its dividends. This is an alarming sign that could mean that Eastern Bankshares' dividend may no longer be sustainable for longer.

Analysts expect a massive rise in earnings per share in the next 3 years. They also estimate that the future payout ratio will be 36% in the same time horizon, so there isn't too much pressure on the dividend.

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 $0.40. This implies that the company grew its distributions at a yearly rate of about 19% 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'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. However, initial appearances might be deceiving. In the last three years, Eastern Bankshares' earnings per share has shrunk at approximately 2.7% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Eastern Bankshares that you should be aware of before investing. Is Eastern Bankshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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