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Valley National Bancorp (NASDAQ:VLY) has announced that it will pay a dividend of $0.11 per share on the 1st of April. This means the annual payment is 4.6% of the current stock price, which is above the average for the industry.
View our latest analysis for Valley National Bancorp
Valley National Bancorp's Dividend Forecasted To Be Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't 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. Based on Valley National Bancorp's last earnings report, the payout ratio is at a decent 63%, meaning that the company is able to pay out its dividend with a bit of room to spare.
The next 3 years are set to see EPS grow by 91.8%. Analysts estimate the future payout ratio will be 39% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Valley National Bancorp Has A Solid Track Record
The company has an extended history of paying stable dividends. There hasn't been much of a change in the dividend over the last 10 years. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Dividend Growth May Be Hard To Come By
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. It's not great to see that Valley National Bancorp's earnings per share has fallen at approximately 6.1% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
We should note that Valley National Bancorp has issued stock equal to 10% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
Our Thoughts On Valley National Bancorp's Dividend
Overall, a consistent dividend is a good thing, and we think that Valley National Bancorp has the ability to continue this into the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.