Dime Community Bancshares, Inc. (NASDAQ:DCOM) has announced that it will pay a dividend of $0.25 per share on the 24th of October. Based on this payment, the dividend yield will be 3.6%, which is fairly typical 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 Dime Community Bancshares' stock price has increased by 44% 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 Dime Community Bancshares

Dime Community Bancshares' Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Dime Community Bancshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 65%, which means that Dime Community Bancshares would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 159.9% over the next 3 years. Analysts forecast the future payout ratio could be 30% over the same time horizon, which is a number we think the company can maintain.

Dime Community Bancshares Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.864, compared to the most recent full-year payment of $1.00. This implies that the company grew its distributions at a yearly rate of about 1.5% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. In the last five years, Dime Community Bancshares' earnings per share has shrunk at approximately 6.1% per annum. 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. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Dime Community Bancshares' Dividend

Overall, we think Dime Community Bancshares is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Dime Community Bancshares that you should be aware of before investing. 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.