The board of Sandy Spring Bancorp, Inc. (NASDAQ:SASR) has announced that it will pay a dividend of $0.34 per share on the 21st of August. This makes the dividend yield 4.7%, which will augment investor returns quite nicely.

View our latest analysis for Sandy Spring Bancorp

Sandy Spring 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.

Sandy Spring Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 68%, which means that Sandy Spring Bancorp would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 18.5%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 61% by next year, which is in a pretty sustainable range.

Sandy Spring Bancorp Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from $0.72 total annually to $1.36. This means that it has been growing its distributions at 6.6% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Sandy Spring Bancorp has seen earnings per share falling at 8.9% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Sandy Spring Bancorp's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Is Sandy Spring Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.