Byline Bancorp (NYSE:BY) Is Due To Pay A Dividend Of $0.09

The board of Byline Bancorp, Inc. (NYSE:BY) has announced that it will pay a dividend of $0.09 per share on the 20th of August. This means the annual payment will be 1.2% of the current stock price, which is lower than the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Byline Bancorp's stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Byline Bancorp

Byline Bancorp's Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Byline Bancorp has a good history of paying out dividends, with its current track record at 5 years. While past data isn't a guarantee for the future, Byline Bancorp's latest earnings report puts its payout ratio at 13%, showing that the company can pay out its dividends comfortably.

EPS is set to fall by 3.6% over the next 12 months. But if the dividend continues along recent trends, we estimate the future payout ratio could be 18%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Byline Bancorp Is Still Building Its Track Record

It is great to see that Byline Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.12 in 2019 to the most recent total annual payment of $0.36. This means that it has been growing its distributions at 25% per annum over that time. Byline Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Byline Bancorp has been growing its earnings per share at 11% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

An additional note is that the company has been raising capital by issuing stock equal to 17% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We Really Like Byline Bancorp's Dividend

Overall, we like to see the dividend staying consistent, and we think Byline Bancorp might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Byline Bancorp you should be aware of, and 1 of them is a bit unpleasant. Is Byline Bancorp 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.

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