Five Star Bancorp (NASDAQ:FSBC) Is Paying Out A Dividend Of $0.20

Five Star Bancorp (NASDAQ:FSBC) has announced that it will pay a dividend of $0.20 per share on the 11th of August. Based on this payment, the dividend yield will be 2.6%, which is fairly typical for the industry.

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Five Star Bancorp's Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Five Star Bancorp has a short history of paying out dividends, with its current track record at only 4 years. Taking data from Five Star Bancorp's last earnings report, the payout ratio is at a decent 35%, meaning that the company is able to pay out its dividend with some room to spare.

The next year is set to see EPS grow by 18.3%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 19% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Five Star Bancorp

Five Star Bancorp Is Still Building Its Track Record

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 annual payment during the last 4 years was $0.60 in 2021, and the most recent fiscal year payment was $0.80. This implies that the company grew its distributions at a yearly rate of about 7.5% over that duration. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. 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 7.9% 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, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Five Star Bancorp is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign 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.