Shore Bancshares' (NASDAQ:SHBI) Dividend Will Be $0.12

Shore Bancshares, Inc. (NASDAQ:SHBI) has announced that it will pay a dividend of $0.12 per share on the 30th of November. This payment means that the dividend yield will be 4.3%, which is around the industry average.

See our latest analysis for Shore Bancshares

Shore Bancshares' Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Shore Bancshares has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 89%shows that Shore Bancshares would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast by analysts to rise exponentially over the next 3 years. They also estimate that the future payout ratio could reach 29% in the same time horizon, which is in a comfortable range for us.

Shore Bancshares Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 8 years was $0.08 in 2015, and the most recent fiscal year payment was $0.48. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 18% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

We should note that Shore Bancshares has issued stock equal to 67% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

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 payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've identified 4 warning signs for Shore Bancshares (1 shouldn't be ignored!) that you should be aware of before investing. Is Shore Bancshares not quite the opportunity you were looking for? Why not check out our selection of top 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.