LINKBANCORP, Inc. (NASDAQ:LNKB) has announced that it will pay a dividend of $0.075 per share on the 16th of December. The dividend yield will be 4.2% based on this payment which is still above the industry average.

Check out our latest analysis for LINKBANCORP

LINKBANCORP's Dividend Forecasted To Be Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having paid out dividends for only 2 years, LINKBANCORP does not have much of a history being a dividend paying company. Past distributions unfortunately do not guarantee future ones, and LINKBANCORP's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is worrying for investors as it points to LINKBANCORP's dividends being unsustainable in the long term.

The next 3 years are set to see EPS grow by 175.1%. For the same time horizon, analysts estimate that the future payout ratio could be 36% which would be quite comfortable going to take the dividend forward.

LINKBANCORP Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The payments haven't really changed that much since 2 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. LINKBANCORP's EPS has fallen by approximately 51% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

An additional note is that the company has been raising capital by issuing stock equal to 130% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

LINKBANCORP's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

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. To that end, LINKBANCORP has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.