BankUnited (NYSE:BKU) Is Increasing Its Dividend To $0.29

The board of BankUnited, Inc. (NYSE:BKU) has announced that it will be increasing its dividend by 7.4% on the 30th of April to $0.29, up from last year's comparable payment of $0.27. This makes the dividend yield 4.0%, which is above the industry average.

View our latest analysis for BankUnited

BankUnited's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, BankUnited has a long history of paying out a part of its earnings to shareholders. Based on BankUnited's last earnings report, the payout ratio is at a decent 45%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 58.7% over the next 3 years. Analysts forecast the future payout ratio could be 37% over the same time horizon, which is a number we think the company can maintain.

BankUnited Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.84, compared to the most recent full-year payment of $1.08. This implies that the company grew its distributions at a yearly rate of about 2.5% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

BankUnited May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though BankUnited's EPS has declined at around 4.8% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On BankUnited's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for BankUnited that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.