Texas Community Bancshares (NASDAQ:TCBS) Has Announced That It Will Be Increasing Its Dividend To $0.04

Texas Community Bancshares, Inc. (NASDAQ:TCBS) will increase its dividend from last year's comparable payment on the 28th of March to $0.04. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

See our latest analysis for Texas Community Bancshares

Texas Community Bancshares' Distributions May Be Difficult To Sustain

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

Given that this is the first year that Texas Community Bancshares is paying out a dividend, we are not yet able to make an analysis based on the company's dividend paying history. But while Texas Community Bancshares was able to finally pay out a dividend for the first time, its most recent earnings report shows the company's net income didn't cover its dividend distribution. This is worrying for investors as it points to Texas Community Bancshares' dividends being unsustainable in the long term.

Looking forward, earnings per share could 139.4% over the next year if the trend of the last few years can't be broken. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Texas Community Bancshares Doesn't Have A Long Payment History

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. 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 Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Texas Community Bancshares has seen EPS fall by 139% over the last 12 months. Decreases in earnings as large as this could start to put some pressure on the dividend if they are sustained for several years. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

Texas Community Bancshares' Dividend Doesn't Look Great

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.

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. Case in point: We've spotted 3 warning signs for Texas Community Bancshares (of which 1 can't be ignored!) you should know about. Is Texas Community Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.