Bank of Marin Bancorp (NASDAQ:BMRC) will pay a dividend of $0.25 on the 12th of February. This means that the annual payment will be 3.8% of the current stock price, which is in line with the average for the industry.

Bank of Marin Bancorp's Earnings Will Easily Cover The Distributions

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

Having distributed dividends for at least 10 years, Bank of Marin Bancorp has a long history of paying out a part of its earnings to shareholders. Past distributions unfortunately do not guarantee future ones, and Bank of Marin Bancorp's 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 Bank of Marin Bancorp's dividend at its current rate may no longer be sustainable for longer.

According to analysts, EPS should be several times higher in the next 3 years. Additionally, they estimate future payout ratio will be 39% over the same time horizon, which makes us pretty comfortable with the sustainability of the dividend.

Bank of Marin Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.44 in 2016, and the most recent fiscal year payment was $1.00. This implies that the company grew its distributions at a yearly rate of about 8.6% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Bank of Marin Bancorp's EPS has fallen by approximately 44% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Is Bank of Marin Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.