ServisFirst Bancshares (NYSE:SFBS) Is Increasing Its Dividend To $0.30

ServisFirst Bancshares Inc -0.76% Pre

ServisFirst Bancshares Inc

SFBS

59.13

59.13

-0.76%

0.00% Pre

ServisFirst Bancshares, Inc.'s (NYSE:SFBS) dividend will be increasing from last year's payment of the same period to $0.30 on 8th of January. Despite this raise, the dividend yield of 1.7% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that ServisFirst Bancshares' stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for ServisFirst Bancshares

ServisFirst Bancshares' Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for 9 years, ServisFirst Bancshares has a good history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 26%shows that ServisFirst Bancshares would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 12.0% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 31% over the same time period, which is in a pretty comfortable range.

historic-dividend
NYSE:SFBS Historic Dividend December 28th 2023

ServisFirst Bancshares Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2014, the dividend has gone from $0.10 total annually to $1.20. This means that it has been growing its distributions at 32% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

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 ServisFirst Bancshares has been growing its earnings per share at 13% 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 ServisFirst Bancshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for ServisFirst Bancshares (of which 1 is significant!) you should know about. Is ServisFirst Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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