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The board of Bank of Marin Bancorp (NASDAQ:BMRC) has announced that it will pay a dividend on the 15th of August, with investors receiving $0.25 per share. This means the annual payment is 4.9% of the current stock price, which is above the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Bank of Marin Bancorp's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Bank of Marin Bancorp
Bank of Marin Bancorp Will Pay Out More Than It Is Earning
If the payments aren't sustainable, a high yield for a few years won't matter that much.
Bank of Marin Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. But while this history shows that the company was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company did not make enough earnings to cover its dividend payout. This is an alarming sign that could mean that Bank of Marin Bancorp's dividend at its current rate may no longer be sustainable for longer.
Over the next year, EPS is forecast to expand by 161.3%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.
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. The annual payment during the last 10 years was $0.36 in 2014, and the most recent fiscal year payment was $1.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Bank of Marin Bancorp's EPS has fallen by approximately 13% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.