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It looks like Brookline Bancorp, Inc. (NASDAQ:BRKL) is about to go ex-dividend in the next four days. You can purchase shares before the 6th of August in order to receive the dividend, which the company will pay on the 21st of August.
Brookline Bancorp's next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.46 to shareholders. Calculating the last year's worth of payments shows that Brookline Bancorp has a trailing yield of 4.8% on the current share price of $9.595. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Brookline Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 78% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Brookline Bancorp's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Brookline Bancorp has delivered 3.1% dividend growth per year on average over the past 10 years.
To Sum It Up
Should investors buy Brookline Bancorp for the upcoming dividend? Brookline Bancorp's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.