Franklin Financial Services (NASDAQ:FRAF) Will Pay A Dividend Of $0.32

The board of Franklin Financial Services Corporation (NASDAQ:FRAF) has announced that it will pay a dividend of $0.32 per share on the 28th of August. This makes the dividend yield 4.4%, which will augment investor returns quite nicely.

View our latest analysis for Franklin Financial Services

Franklin Financial Services' Payment Expected To Have Solid Earnings Coverage

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

Franklin Financial Services 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 Franklin Financial Services' payout ratio of 41% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share could rise by 18.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the future payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Franklin Financial Services Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.68, compared to the most recent full-year payment of $1.28. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Franklin Financial Services has seen EPS rising for the last five years, at 18% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Franklin Financial Services Looks Like A Great Dividend Stock

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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Franklin Financial Services in our latest insider ownership analysis. 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.

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