Texas Community Bancshares, Inc. (NASDAQ:TCBS) has announced that it will pay a dividend of $0.04 per share on the 24th of March. The dividend yield is 0.9% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Texas Community Bancshares

Texas Community Bancshares' Distributions May Be Difficult To Sustain

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Having paid out dividends for only 2 years, Texas Community Bancshares does not have much of a history being a dividend paying company. But while Texas Community Bancshares was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company didn't have enough earnings to cover their dividends. This is worrying for investors as it points to Texas Community Bancshares' dividends being unsustainable in the long term.

Recent, EPS has fallen by 94.4%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Texas Community Bancshares Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The annual payment during the last 2 years was $0.08 in 2023, and the most recent fiscal year payment was $0.16. This means that it has been growing its distributions at 41% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

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. Unfortunately things aren't as good as they seem. Texas Community Bancshares' earnings per share has shrunk at 94% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Texas Community Bancshares' Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Texas Community Bancshares you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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