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Valley National Bancorp (NASDAQ:VLY) will pay a dividend of $0.11 on the 3rd of October. This means that the annual payment will be 3.5% of the current stock price, which is in line with the average for the industry.
Check out our latest analysis for Valley National Bancorp
Valley National Bancorp's Dividend Forecasted To Be Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Having distributed dividends for at least 10 years, Valley National Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 44%, which means that Valley National Bancorp would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, EPS is forecast to rise by 42.4% over the next 3 years. Analysts forecast the future payout ratio could be 29% over the same time horizon, which is a number we think the company can maintain.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from $0.657 total annually to $0.44. The dividend has shrunk at around 3.9% 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.
Valley National Bancorp May Find It Hard To Grow The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 4.3% per year. Valley National Bancorp is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.
We should note that Valley National Bancorp has issued stock equal to 25% of shares outstanding. 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.
In Summary
Overall, we think Valley National Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Valley National 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.