The board of Burke & Herbert Financial Services Corp. (NASDAQ:BHRB) has announced that it will pay a dividend of $0.55 per share on the 2nd of March. This means that the annual payment will be 3.5% of the current stock price, which is in line with the average for the industry.

Burke & Herbert Financial Services' Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Having distributed dividends for at least 10 years, Burke & Herbert Financial Services has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 28%, which means that Burke & Herbert Financial Services would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 26.4%. The future payout ratio could be 26% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Burke & Herbert Financial Services Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.85 in 2016 to the most recent total annual payment of $2.20. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Burke & Herbert Financial Services has seen EPS rising for the last five years, at 17% per annum. Burke & Herbert Financial Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Burke & Herbert Financial Services' Dividend

Overall, we like to see the dividend staying consistent, and we think Burke & Herbert Financial Services might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Burke & Herbert Financial Services stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.