Berkshire Hills Bancorp Inc (NYSE:BHLB) has pleased shareholders over the past 10 years, by paying out dividends. The company is currently worth US$1.5b, and now yields roughly 2.6%. Does Berkshire Hills Bancorp tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Berkshire Hills Bancorp fit our criteria?
The current trailing twelve-month payout ratio for the stock is 45%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect BHLB’s payout to fall to 29% of its earnings, which leads to a dividend yield of 2.6%. However, EPS should increase to $2.84, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of BHLB it has increased its DPS from $0.64 to $0.88 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Berkshire Hills Bancorp produces a yield of 2.6%, which is on the low-side for Banks stocks.
With this in mind, I definitely rank Berkshire Hills Bancorp as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three relevant aspects you should further research:
- 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 firstname.lastname@example.org.