Provident Financial Holdings (NASDAQ:PROV) Has Announced A Dividend Of US$0.14

The board of Provident Financial Holdings, Inc. (NASDAQ:PROV) has announced that it will pay a dividend on the 9th of June, with investors receiving US$0.14 per share. The dividend yield is 3.7% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Provident Financial Holdings

Provident Financial Holdings' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Provident Financial Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 27.8%. If the dividend continues along recent trends, we estimate the payout ratio could be 59%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Provident Financial Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from US$0.04 in 2012 to the most recent annual payment of US$0.56. This means that it has been growing its distributions at 30% per annum 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.

Provident Financial Holdings Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Provident Financial Holdings has impressed us by growing EPS at 9.7% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Provident Financial Holdings' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Provident Financial Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.