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Trustmark Corporation (NASDAQ:TRMK) will pay a dividend of $0.23 on the 15th of September. This means the dividend yield will be fairly typical at 2.8%.
Trustmark's Payment Expected To Have Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time.
Trustmark has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Trustmark's payout ratio of 51% is a good sign as this means that earnings decently cover dividends.
The next year is set to see EPS grow by 13.5%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 45% by next year, which is in a pretty sustainable range.
Trustmark Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The last annual payment of $0.92 was flat on the annual payment from10 years ago. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Trustmark May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Trustmark hasn't seen much change in its earnings per share over the last five years. Growth of 1.2% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
We Really Like Trustmark's Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Trustmark that you should be aware of before investing. Is Trustmark not quite the opportunity you were looking for? Why not check out our selection of top 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.
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