Eastern Bankshares, Inc. (NASDAQ:EBC) will pay a dividend of $0.11 on the 15th of December. This means the dividend yield will be fairly typical at 3.9%.

Check out our latest analysis for Eastern Bankshares

Eastern Bankshares' Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having paid out dividends for only 3 years, Eastern Bankshares does not have much of a history being a dividend paying company. Past distributions unfortunately do not guarantee future ones, and Eastern Bankshares' last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is an alarming sign that could mean that Eastern Bankshares' dividend may no longer be sustainable for longer.

According to analysts, EPS should be several times higher in the next 3 years. In addtion, they also estimate the future payout ratio could reach 32% in the same time period, which we would be comfortable to see continuing.

Eastern Bankshares 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. The annual payment during the last 3 years was $0.24 in 2020, and the most recent fiscal year payment was $0.44. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Eastern Bankshares' earnings per share has shrunk at 20% a year over the past three years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Eastern Bankshares' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.