Burke & Herbert Financial Services Corp. (NASDAQ:BHRB) will increase its dividend on the 2nd of December to $0.55, which is 3.8% higher than last year's payment from the same period of $0.53. This makes the dividend yield about the same as the industry average at 3.3%.

Check out our latest analysis for Burke & Herbert Financial Services

Burke & Herbert Financial Services' Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Burke & Herbert Financial Services has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions unfortunately do not guarantee future ones, and Burke & Herbert Financial Services' last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is very worrying for shareholders, as this shows that Burke & Herbert Financial Services will not be able to sustain its dividend at its current rate.

Looking forward, earnings per share is forecast by analysts to rise exponentially over the next 3 years. They also estimate that the future payout ratio could reach 29% in the same time horizon, which is in a comfortable range for us.

Burke & Herbert Financial Services Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.85 in 2014 to the most recent total annual payment of $2.12. This implies that the company grew its distributions at a yearly rate of about 1.4% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Over the past five years, it looks as though Burke & Herbert Financial Services' EPS has declined at around 18% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

An additional note is that the company has been raising capital by issuing stock equal to 101% 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.