S&T Bancorp, Inc. (NASDAQ:STBA) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of November to $0.33. This will take the annual payment to 5.0% of the stock price, which is above what most companies in the industry pay.
S&T Bancorp's Earnings Will Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained.
Having distributed dividends for at least 10 years, S&T Bancorp has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, S&T Bancorp's payout ratio sits at 8.4%, an extremely comfortable number that shows that it can pay its dividend.
EPS is set to fall by 26.2% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 41% over the same time period, which is in a pretty comfortable range.
S&T Bancorp Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.60 in 2013, and the most recent fiscal year payment was $1.28. This means that it has been growing its distributions at 7.9% 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.
S&T Bancorp Could Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that S&T Bancorp has been growing its earnings per share at 8.9% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like S&T Bancorp'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 distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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 of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for S&T Bancorp that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection 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.