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The board of BankUnited, Inc. (NYSE:BKU) has announced that it will be increasing its dividend by 6.9% on the 30th of April to $0.31, up from last year's comparable payment of $0.29. This takes the annual payment to 3.4% of the current stock price, which is about average for the industry.
BankUnited's Dividend Forecasted To Be Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time.
Having distributed dividends for at least 10 years, BankUnited has a long history of paying out a part of its earnings to shareholders. Based on BankUnited's last earnings report, the payout ratio is at a decent 37%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, EPS is forecast to rise by 23.9% over the next 3 years. Analysts estimate the future payout ratio will be 34% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for BankUnited
BankUnited Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.84 in 2015, and the most recent fiscal year payment was $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 3.3% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Unfortunately, BankUnited's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Our Thoughts On BankUnited's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.