The board of Provident Financial Holdings, Inc. (NASDAQ:PROV) has announced that it will pay a dividend on the 8th of December, with investors receiving $0.14 per share. Including this payment, the dividend yield on the stock will be 4.1%, which is a modest boost for shareholders' returns.
Provident Financial Holdings' Dividend Forecasted To Be Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Provident Financial Holdings has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 48%, which means that Provident Financial Holdings would be able to pay its last dividend without pressure on the balance sheet.
Over the next year, EPS is forecast to expand by 10.9%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 44% by next year, which is in a pretty sustainable range.
Provident Financial Holdings Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.16 in 2012 to the most recent total annual payment of $0.56. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Provident Financial Holdings has been growing its earnings per share at 22% a year over the past five years. Provident Financial Holdings is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
We Really Like Provident Financial Holdings' Dividend
Overall, we like to see the dividend staying consistent, and we think Provident Financial Holdings might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. 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 Provident Financial Holdings that investors need to be conscious of moving forward. Is Provident Financial Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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