RBB Bancorp (NASDAQ:RBB) will pay a dividend of $0.16 on the 12th of May. This makes the dividend yield 4.1%, which will augment investor returns quite nicely.

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RBB Bancorp's Dividend Forecasted To Be Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much.

RBB Bancorp has a good history of paying out dividends, with its current track record at 8 years. Based on RBB Bancorp's last earnings report, the payout ratio is at a decent 43%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 41.9%. Analysts forecast the future payout ratio could be 35% over the same time horizon, which is a number we think the company can maintain.

See our latest analysis for RBB Bancorp

RBB Bancorp's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of $0.32 in 2017 to the most recent total annual payment of $0.64. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Come By

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though RBB Bancorp's EPS has declined at around 5.1% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On RBB 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 low payout ratio is a redeeming feature, but generally we are not too happy with the payments RBB Bancorp has been making. We don't think RBB Bancorp is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for RBB Bancorp that investors should take into consideration. 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.