New York Community Bancorp (NYSE:NYCB) Is Due To Pay A Dividend Of US$0.17

The board of New York Community Bancorp, Inc. (NYSE:NYCB) has announced that it will pay a dividend on the 17th of February, with investors receiving US$0.17 per share. This makes the dividend yield 5.8%, which will augment investor returns quite nicely.

See our latest analysis for New York Community Bancorp

New York Community Bancorp's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, New York Community Bancorp is earning enough to cover the payment, but the it makes up 191% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to fall by 2.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 54%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was US$1.00 in 2012, and the most recent fiscal year payment was US$0.68. Doing the maths, this is a decline of about 3.8% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, New York Community Bancorp has only grown its earnings per share at 3.6% per annum over the past five years. Growth of 3.6% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On New York Community Bancorp's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While New York Community Bancorp is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for New York Community Bancorp that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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