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BancorpSouth Bank (NYSE:BXS) Is Paying Out A Larger Dividend Than Last Year

BancorpSouth Bank (NYSE:BXS) has announced that it will be increasing its dividend on the 1st of October to US$0.20. This will take the annual payment to 2.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for BancorpSouth Bank

BancorpSouth Bank's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, BancorpSouth Bank's dividend was only 27% of earnings, however it was paying out 181% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to fall by 23.4%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 41%, which is comfortable for the company to continue in the future.

historic-dividend
historic-dividend

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from US$0.88 in 2011 to the most recent annual payment of US$0.80. The dividend has shrunk at a rate of less than 1% a year over this period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that BancorpSouth Bank has grown earnings per share at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we always like to see the dividend being raised, but we don't think BancorpSouth Bank will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think BancorpSouth Bank is a great stock to add to your portfolio if income is your focus.

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. For instance, we've picked out 2 warning signs for BancorpSouth Bank that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

This article by Simply Wall St is general in nature. 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.

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

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