Lakeland Financial's (NASDAQ:LKFN) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Lakeland Financial Corporation (NASDAQ:LKFN) has announced that the dividend on 6th of February will be increased to $0.46, which will be 15% higher than last year's payment of $0.40 which covered the same period. Despite this raise, the dividend yield of 2.1% is only a modest boost to shareholder returns.

See our latest analysis for Lakeland Financial

Lakeland Financial's Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

Having distributed dividends for at least 10 years, Lakeland Financial has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Lakeland Financial's payout ratio of 40% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 7.2%. Analysts forecast the future payout ratio could be 41% over the same time horizon, which is a number we think the company can maintain.

Lakeland Financial Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.413 in 2013 to the most recent total annual payment of $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Lakeland Financial has been growing its earnings per share at 11% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Lakeland Financial Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Lakeland Financial is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Lakeland Financial that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.