The board of New York Community Bancorp, Inc. (NYSE:NYCB) has announced that it will pay a dividend of $0.17 per share on the 16th of February. This payment means that the dividend yield will be 6.9%, which is around the industry average.
New York Community Bancorp's Payment Expected To Have Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much.
Having distributed dividends for at least 10 years, New York Community Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 54%, which means that New York Community Bancorp would be able to pay its last dividend without pressure on the balance sheet.
The next 3 years are set to see EPS grow by 6.8%. Analysts forecast the future payout ratio could be 57% over the same time horizon, which is a number we think the company can maintain.
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $1.00 in 2013 to the most recent total annual payment of $0.68. This works out to be a decline of approximately 3.8% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
New York Community Bancorp May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, New York Community Bancorp's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
We should note that New York Community Bancorp has issued stock equal to 46% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about New York Community Bancorp's payments, as there could be some issues with sustaining them into the future. While New York Community Bancorp is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for New York Community Bancorp that investors should take into consideration. Is New York Community 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.
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