Magyar Bancorp (NASDAQ:MGYR) Is Due To Pay A Dividend Of $0.05

The board of Magyar Bancorp, Inc. (NASDAQ:MGYR) has announced that it will pay a dividend of $0.05 per share on the 22nd of February. Although the dividend is now higher, the yield is only 1.7%, which is below the industry average.

Check out our latest analysis for Magyar Bancorp

Magyar Bancorp's Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Magyar Bancorp has a short history of paying out dividends, with its current track record at only 2 years. Despite the company's shorter dividend history however, calculating for its payout ratio of 12% shows that Magyar Bancorp is able to comfortably pay dividends.

Over the next year, EPS could expand by 27.1% if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Magyar Bancorp's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2022, the dividend has gone from $0.12 total annually to $0.20. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Magyar Bancorp has seen EPS rising for the last five years, at 27% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Magyar Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Magyar Bancorp that investors need to be conscious of moving forward. 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.