FS Bancorp's (NASDAQ:FSBW) Dividend Will Be Increased To $0.26

FS Bancorp, Inc.'s (NASDAQ:FSBW) dividend will be increasing from last year's payment of the same period to $0.26 on 22nd of February. This makes the dividend yield about the same as the industry average at 2.8%.

See our latest analysis for FS Bancorp

FS Bancorp's Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, FS Bancorp has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 22% also shows that FS Bancorp is able to comfortably pay dividends.

EPS is set to fall by 2.7% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 24% over the same time period, which is in a pretty comfortable range.

FS Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.10 in 2014, and the most recent fiscal year payment was $1.04. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. FS Bancorp has impressed us by growing EPS at 7.3% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

FS Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income 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. For example, we've picked out 1 warning sign for FS Bancorp that investors should know about before committing capital to this stock. Is FS 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.