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Investors who want to cash in on Berkshire Hills Bancorp, Inc.’s (NYSE:BHLB) upcoming dividend of US$0.23 per share have only 4 days left to buy the shares before its ex-dividend date, 13 February 2019, in time for dividends payable on the 28 February 2019. Should you diversify into Berkshire Hills Bancorp and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does Berkshire Hills Bancorp fare?
The company currently pays out 39% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 32% which, assuming the share price stays the same, leads to a dividend yield of around 3.2%. However, EPS should increase to $2.52, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. BHLB has increased its DPS from $0.64 to $0.92 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes BHLB a true dividend rockstar.
Compared to its peers, Berkshire Hills Bancorp produces a yield of 3.2%, which is high for Banks stocks but still below the market’s top dividend payers.
Keeping in mind the dividend characteristics above, Berkshire Hills Bancorp is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for BHLB’s future growth? Take a look at our free research report of analyst consensus for BHLB’s outlook.
- Valuation: What is BHLB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BHLB is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.