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M&T Bank (NYSE:MTB) Has Affirmed Its Dividend Of $1.20

The board of M&T Bank Corporation (NYSE:MTB) has announced that it will pay a dividend on the 30th of December, with investors receiving $1.20 per share. Based on this payment, the dividend yield will be 2.8%, which is fairly typical for the industry.

View our latest analysis for M&T Bank

M&T Bank's Payment Expected To Have Solid Earnings Coverage

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, M&T Bank has a long history of paying out a part of its earnings to shareholders. Based on M&T Bank's last earnings report, the payout ratio is at a decent 46%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 77.4%. Analysts forecast the future payout ratio could be 29% over the same time horizon, which is a number we think the company can maintain.

historic-dividend
historic-dividend

M&T Bank Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the annual payment back then was $2.80, compared to the most recent full-year payment of $4.80. This works out to be a compound annual growth rate (CAGR) of approximately 5.5% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, M&T Bank's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.1% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

We should note that M&T Bank has issued stock equal to 34% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like M&T Bank's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 example, we've picked out 2 warning signs for M&T Bank that investors should know about before committing capital to this stock. Is M&T Bank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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