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The board of Simmons First National Corporation (NASDAQ:SFNC) has announced that it will be increasing its dividend on the 4th of April to US$0.19. Based on the announced payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.
Simmons First National's Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Simmons First National's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to fall by 21.5%. If the dividend continues along recent trends, we estimate the payout ratio could be 41%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Simmons First National Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from US$0.38 in 2012 to the most recent annual payment of US$0.76. This means that it has been growing its distributions at 7.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
We Could See Simmons First National's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Simmons First National has impressed us by growing EPS at 9.8% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Simmons First National's prospects of growing its dividend payments in the future.
We Really Like Simmons First National's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Simmons First National that investors need to be conscious of moving forward. 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.