ESSA Bancorp (NASDAQ:ESSA) Is Increasing Its Dividend To US$0.15

The board of ESSA Bancorp, Inc. (NASDAQ:ESSA) has announced that it will be increasing its dividend by 25% on the 30th of June to US$0.15. Despite this raise, the dividend yield of 3.1% is only a modest boost to shareholder returns.

View our latest analysis for ESSA Bancorp

ESSA Bancorp's Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, ESSA Bancorp's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 6.0% over the next year. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

ESSA Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from US$0.20 to US$0.48. This means that it has been growing its distributions at 9.1% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

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. We are encouraged to see that ESSA Bancorp has grown earnings per share at 21% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

ESSA Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that ESSA Bancorp is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in ESSA Bancorp stock. 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.