Magyar Bancorp (NASDAQ:MGYR) Has Announced A Dividend Of $0.03

The board of Magyar Bancorp, Inc. (NASDAQ:MGYR) has announced that it will pay a dividend of $0.03 per share on the 17th of August. This payment means the dividend yield will be 1.8%, which is below the average for the industry.

Check out our latest analysis for Magyar Bancorp

Magyar Bancorp's Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

Currently, Magyar Bancorp does not yet have a history of paying dividends out, with this being its first year doing so. While this gives us less confidence in Magyar Bancorp's long-term dividend potential, the company's payout ratio of 9.8%is a great sign for current shareholders, as this means that earnings greatly cover dividends.

Looking forward, earnings per share could rise by 36.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the future payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

Magyar Bancorp Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Magyar Bancorp has impressed us by growing EPS at 36% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Magyar Bancorp's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Magyar Bancorp 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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