On the 19 November 2018, Sterling Bancorp (NYSE:STL) will be paying shareholders an upcoming dividend amount of US$0.07 per share. However, investors must have bought the company’s stock before 02 November 2018 in order to qualify for the payment. That means you have only 4 days left! What does this mean for current shareholders and potential investors? Below, I will explain how holding Sterling Bancorp can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
Does Sterling Bancorp pass our checks?
The company currently pays out 22% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect STL’s payout to fall to 14% of its earnings, which leads to a dividend yield of around 1.7%. However, EPS should increase to $2.01, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. STL has increased its DPS from $0.24 to $0.28 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 STL a true dividend rockstar.
In terms of its peers, Sterling Bancorp generates a yield of 1.6%, which is on the low-side for Banks stocks.
With these dividend metrics in mind, I definitely rank Sterling Bancorp as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for STL’s future growth? Take a look at our free research report of analyst consensus for STL’s outlook.
- Valuation: What is STL 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 STL 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.