Financial Institutions (NASDAQ:FISI) Is Increasing Its Dividend To $0.30

Financial Institutions, Inc.'s (NASDAQ:FISI) periodic dividend will be increasing on the 3rd of April to $0.30, with investors receiving 3.4% more than last year's $0.29. This makes the dividend yield 4.6%, which is above the industry average.

View our latest analysis for Financial Institutions

Financial Institutions' Earnings Will Easily Cover The Distributions

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. Taking data from its last earnings report, calculating for the company's payout ratio shows 32%, which means that Financial Institutions would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 3.5% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 35% over the same time period, which we think the company can easily maintain.

Financial Institutions Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.56 total annually to $1.16. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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 Financial Institutions has been growing its earnings per share at 11% a year over the past five years. Financial Institutions definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Financial Institutions' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. As an example, we've identified 1 warning sign for Financial Institutions that you should be aware of before investing. Is Financial Institutions 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.