Simmons First National (NASDAQ:SFNC) Has Announced That It Will Be Increasing Its Dividend To $0.42
Simmons First National Corporation (NASDAQ:SFNC) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of April to $0.42. This makes the dividend yield 4.2%, which is above the industry average.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Simmons First National's stock price has increased by 42% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Simmons First National
Simmons First National's Payment Expected To Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Having distributed dividends for at least 10 years, Simmons First National has a long history of paying out a part of its earnings to shareholders. Based on Simmons First National's last earnings report, the payout ratio is at a decent 43%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, earnings per share is forecast to fall by 11.6% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 55% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.
Simmons First National Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.42, compared to the most recent full-year payment of $0.84. This means that it has been growing its distributions at 7.2% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend's Growth Prospects Are Limited
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Simmons First National hasn't seen much change in its earnings per share over the last five years.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
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. Taking the debate a bit further, we've identified 1 warning sign for Simmons First National that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
