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The board of Hanover Bancorp, Inc. (NASDAQ:HNVR) has announced that it will pay a dividend of $0.10 per share on the 13th of November. Including this payment, the dividend yield on the stock will be 2.1%, which is a modest boost for shareholders' returns.
See our latest analysis for Hanover Bancorp
Hanover Bancorp's Earnings Will Easily Cover The Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.
Hanover Bancorp has a short history of paying out dividends, with its current track record at only 2 years. Despite the company's shorter dividend history however, calculating for its payout ratio of 20% shows that Hanover Bancorp is able to comfortably pay dividends.
Looking forward, EPS is forecast to rise by 58.3% over the next 3 years. The future payout ratio could be 15% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Hanover Bancorp Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. There hasn't been much of a change in the dividend over the last 2 years. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
Dividend Growth May Be Hard To Achieve
The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. It's not great to see that Hanover Bancorp's earnings per share has fallen at approximately 2.1% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Our Thoughts On Hanover Bancorp's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Hanover Bancorp 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.