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National Bank Holdings Corporation (NYSE:NBHC) will increase its dividend on the 15th of March to US$0.23. The announced payment will take the dividend yield to 2.0%, which is in line with the average for the industry.
National Bank Holdings' Earnings Easily Cover the Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, National Bank Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to fall by 8.2%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 39%, which is comfortable for the company to continue in the future.
National Bank Holdings Doesn't Have A Long Payment History
National Bank Holdings' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from US$0.20 in 2013 to the most recent annual payment of US$0.92. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that National Bank Holdings has grown earnings per share at 31% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
National Bank Holdings Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, National Bank Holdings has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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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.