Five Star Bancorp (NASDAQ:FSBC) Has Affirmed Its Dividend Of $0.20

The board of Five Star Bancorp (NASDAQ:FSBC) has announced that it will pay a dividend of $0.20 per share on the 12th of November. This payment means that the dividend yield will be 2.6%, which is around the industry average.

See our latest analysis for Five Star Bancorp

Five Star Bancorp's Dividend Forecasted To Be Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Having paid out dividends for only 3 years, Five Star Bancorp does not have much of a history being a dividend paying company. Diving into the company's earnings report, the payout ratio is set at 34%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

Over the next 3 years, EPS is forecast to expand by 29.1%. The future payout ratio could be 29% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Five Star Bancorp Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the annual payment back then was $0.60, compared to the most recent full-year payment of $0.80. This means that it has been growing its distributions at 10% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Five Star Bancorp's EPS has declined at around 9.8% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

An additional note is that the company has been raising capital by issuing stock equal to 24% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Five Star Bancorp's payments, as there could be some issues with sustaining them into the future. While Five Star Bancorp is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Five Star Bancorp is a great stock to add to your portfolio if income is your focus.

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. For instance, we've picked out 3 warning signs for Five Star Bancorp that investors should take into consideration. 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.