Why It Might Not Make Sense To Buy Eastern Bankshares, Inc. (NASDAQ:EBC) For Its Upcoming Dividend

It looks like Eastern Bankshares, Inc. (NASDAQ:EBC) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Eastern Bankshares' shares on or after the 3rd of June, you won't be eligible to receive the dividend, when it is paid on the 16th of June.

The company's next dividend payment will be US$0.13 per share. Last year, in total, the company distributed US$0.52 to shareholders. Based on the last year's worth of payments, Eastern Bankshares stock has a trailing yield of around 3.5% on the current share price of US$15.03. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Eastern Bankshares has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Eastern Bankshares lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable.

See our latest analysis for Eastern Bankshares

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Eastern Bankshares was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Eastern Bankshares has delivered an average of 21% per year annual increase in its dividend, based on the past four years of dividend payments.

Get our latest analysis on Eastern Bankshares's balance sheet health here.

Final Takeaway

Has Eastern Bankshares got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. Eastern Bankshares doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of Eastern Bankshares don't faze you, it's worth being mindful of the risks involved with this business. Case in point: We've spotted 2 warning signs for Eastern Bankshares you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.