Eastern Bankshares, Inc.'s (NASDAQ:EBC) dividend will be increasing from last year's payment of the same period to $0.13 on 16th of June. This takes the annual payment to 3.5% of the current stock price, which is about average for the industry.

Our free stock report includes 2 warning signs investors should be aware of before investing in Eastern Bankshares. Read for free now.

Eastern Bankshares Not Expected To Earn Enough To Cover Its Payments

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having paid out dividends for only 4 years, Eastern Bankshares does not have much of a history being a dividend paying company. This is an alarming sign that could mean that Eastern Bankshares' dividend may no longer be sustainable for longer.

Over the next year, EPS is forecast to expand by 148.8%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the future payout ratio reaching 175% over the next year.NasdaqGS:EBC Historic Dividend April 29th 2025

View our latest analysis for Eastern Bankshares

Eastern Bankshares Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of $0.24 in 2021 to the most recent total annual payment of $0.52. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. Eastern Bankshares 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 Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Eastern Bankshares' EPS has fallen by approximately 13% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

An additional note is that the company has been raising capital by issuing stock equal to 23% 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.

Story Continues

Eastern Bankshares' Dividend Doesn't Look Great

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Eastern Bankshares that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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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