Five Star Bancorp (NASDAQ:FSBC) Has Announced A 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 May. This means the dividend yield will be fairly typical at 2.9%.

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

We aren't too impressed by dividend yields unless they can be sustained over time.

Five Star Bancorp is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Diving into the company's earnings report, the payout ratio is set at 35%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

The next 3 years are set to see EPS grow by 53.3%. Analysts forecast the future payout ratio could be 28% over the same time horizon, which is a number we think the company can maintain.

View our latest analysis for Five Star Bancorp

Five Star Bancorp Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.60 in 2021 to the most recent total annual payment of $0.80. This means that it has been growing its distributions at 7.5% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Five Star Bancorp to be a consistent dividend paying stock.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Five Star Bancorp's EPS has declined at around 8.9% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Five Star Bancorp's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Five Star Bancorp that investors need to be conscious of moving forward. Is Five Star Bancorp 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.