The board of Provident Financial Services, Inc. (NYSE:PFS) has announced that it will pay a dividend on the 27th of February, with investors receiving $0.24 per share. This makes the dividend yield 4.3%, which will augment investor returns quite nicely.

Provident Financial Services' Earnings Will Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Having distributed dividends for at least 10 years, Provident Financial Services has a long history of paying out a part of its earnings to shareholders. Based on Provident Financial Services' last earnings report, the payout ratio is at a decent 49%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 24.2%. The future payout ratio could be 37% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Provident Financial Services 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 $0.64 in 2016, and the most recent fiscal year payment was $0.96. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Provident Financial Services Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Provident Financial Services has seen EPS rising for the last five years, at 9.8% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Provident Financial Services' 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. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for Provident Financial Services for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.