Provident Financial Holdings (NASDAQ:PROV) Is Due To Pay A Dividend Of US$0.14

Provident Financial Holdings, Inc. (NASDAQ:PROV) will pay a dividend of US$0.14 on the 8th of March. Based on this payment, the dividend yield will be 3.3%, which is fairly typical for the industry.

See our latest analysis for Provident Financial Holdings

Provident Financial Holdings' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Provident Financial Holdings was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 86% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share is forecast to fall by 32.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 65%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Provident Financial Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$0.04 in 2012, and the most recent fiscal year payment was US$0.56. This means that it has been growing its distributions at 30% per annum 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.

Provident Financial Holdings Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Provident Financial Holdings has grown earnings per share at 8.5% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, a consistent dividend is a good thing, and we think that Provident Financial Holdings has the ability to continue this into the future. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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. We have also put together a list of global stocks with a solid dividend.

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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.