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Banc of California, Inc.'s (NYSE:BANC) investors are due to receive a payment of US$0.06 per share on 1st of July. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.
See our latest analysis for Banc of California
Banc of California's Payment Has Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Banc of California's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 37.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was US$0.46, compared to the most recent full-year payment of US$0.24. The dividend has shrunk at around 6.3% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Banc of California May Find It Hard To Grow The Dividend
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. However, Banc of California has only grown its earnings per share at 4.5% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
The company has also been raising capital by issuing stock equal to 21% 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.
Our Thoughts On Banc of California's Dividend
Overall, a consistent dividend is a good thing, and we think that Banc of California has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Banc of California that investors need to be conscious of moving forward. 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.