Bank of Marin Bancorp (NASDAQ:BMRC) will pay a dividend of $0.25 on the 14th of November. This makes the dividend yield 4.4%, which will augment investor returns quite nicely.

View our latest analysis for Bank of Marin Bancorp

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Bank of Marin Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. 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. In addtion, they also estimate the future payout ratio could reach 60% in the same time period, which we would be comfortable to see continuing.

Bank of Marin Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.38, 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 10% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

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. However, things aren't all that rosy. Over the past five years, it looks as though Bank of Marin Bancorp's EPS has declined at around 20% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Our Thoughts On Bank of Marin Bancorp's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Bank of Marin Bancorp's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Bank of Marin Bancorp is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Bank of Marin Bancorp that investors should know about before committing capital to this stock. 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.