LINKBANCORP's (NASDAQ:LNKB) Dividend Will Be $0.075

The board of LINKBANCORP, Inc. (NASDAQ:LNKB) has announced that it will pay a dividend on the 16th of December, with investors receiving $0.075 per share. The dividend yield will be 4.2% based on this payment which is still above the industry average.

See our latest analysis for LINKBANCORP

LINKBANCORP's Payment Expected To Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

LINKBANCORP has a short history of paying out dividends, with its current track record at only 2 years. While LINKBANCORP's 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 LINKBANCORP's dividend may no longer be sustainable for longer.

Looking forward, EPS is forecast to rise by 175.1% over the next 3 years. For the same time horizon, analysts estimate that the future payout ratio could be 36% which would be quite comfortable going to take the dividend forward.

LINKBANCORP Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The last annual payment of $0.30 was flat on the annual payment from2 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Earnings per share has been sinking by 51% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.

We should note that LINKBANCORP has issued stock equal to 130% of shares outstanding. 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.

LINKBANCORP's Dividend Doesn't Look Sustainable

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. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for LINKBANCORP (1 is concerning!) that you should be aware of before investing. 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.