Financial Institutions (NASDAQ:FISI) Is Due To Pay A Dividend Of $0.30

Financial Institutions, Inc. (NASDAQ:FISI) has announced that it will pay a dividend of $0.30 per share on the 2nd of July. This makes the dividend yield 6.7%, which will augment investor returns quite nicely.

View our latest analysis for Financial Institutions

Financial Institutions' Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Financial Institutions 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 Financial Institutions' payout ratio of 48% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to rise by 12.1% over the next year. 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.

Financial Institutions Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.76, compared to the most recent full-year payment of $1.20. This implies that the company grew its distributions at a yearly rate of about 4.7% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. However, Financial Institutions' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Financial Institutions' Dividend

Overall, a consistent dividend is a good thing, and we think that Financial Institutions has the ability to continue this into the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. 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.