Stock Analysis

Signature Bank (NASDAQ:SBNY) Has Affirmed Its Dividend Of US$0.56

  •  Updated
NasdaqGS:SBNY
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Signature Bank (NASDAQ:SBNY) has announced that it will pay a dividend of US$0.56 per share on the 13th of August. The dividend yield is 0.9% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Signature Bank

Signature Bank's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Signature Bank's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 21.0%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NasdaqGS:SBNY Historic Dividend July 23rd 2021

Signature Bank Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The last annual payment of US$2.24 was flat on the first annual payment 3 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Signature Bank has seen EPS rising for the last five years, at 10% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We'd also point out that Signature Bank has issued stock equal to 13% 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.

We Really Like Signature Bank's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Signature Bank that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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What are the risks and opportunities for Signature Bank?

Signature Bank provides commercial banking products and services.

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Rewards

  • Trading at 35.3% below our estimate of its fair value

  • Earnings grew by 47.9% over the past year

Risks

  • Earnings are forecast to decline by an average of 13.1% per year for the next 3 years

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