The board of Bank of Marin Bancorp (NASDAQ:BMRC) has announced that it will pay a dividend of US$0.24 per share on the 11th of February. This means the dividend yield will be fairly typical at 2.5%.
See our latest analysis for Bank of Marin Bancorp
Bank of Marin Bancorp's Earnings Easily Cover the Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Bank of Marin Bancorp was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 15.0%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.
Bank of Marin Bancorp Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was US$0.32, compared to the most recent full-year payment of US$0.96. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. However, Bank of Marin Bancorp's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Bank of Marin Bancorp is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
The company has also been raising capital by issuing stock equal to 18% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
Bank of Marin Bancorp Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Bank of Marin Bancorp that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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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.