Byline Bancorp, Inc. (NYSE:BY) will pay a dividend of $0.09 on the 22nd of November. Including this payment, the dividend yield on the stock will be 1.6%, which is a modest boost for shareholders' returns.
Byline Bancorp's Earnings Will Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive.
Byline Bancorp has a short history of paying out dividends, with its current track record at only 3 years. Despite the company's shorter dividend history however, calculating for its payout ratio of 16% shows that Byline Bancorp is able to comfortably pay dividends.
The next 3 years are set to see EPS grow by 6.4%. Analysts estimate the future payout ratio will be 19% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Byline Bancorp Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 3 years was $0.12 in 2019, and the most recent fiscal year payment was $0.36. This works out to be a compound annual growth rate (CAGR) of approximately 44% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
Dividend Growth May Be Hard To Come By
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. It's not great to see that Byline Bancorp's earnings per share has fallen at approximately 5.7% 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 Byline 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 be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Byline Bancorp that investors need to be conscious of moving forward. Is Byline Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.
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