Provident Financial Holdings' (NASDAQ:PROV) Dividend Will Be US$0.14

Provident Financial Holdings, Inc. (NASDAQ:PROV) will pay a dividend of US$0.14 on the 2nd of September. This means that the annual payment will be 3.2% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Provident Financial Holdings

Provident Financial Holdings' Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by Provident Financial Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 4.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

Provident Financial Holdings 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 first annual payment during the last 10 years was US$0.04 in 2011, and the most recent fiscal year payment was US$0.56. This works out to be a compound annual growth rate (CAGR) of approximately 30% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Provident Financial Holdings has only grown its earnings per share at 2.5% per annum over the past five years. Growth of 2.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

We Really Like Provident Financial Holdings' Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Provident Financial Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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