Red River Bancshares' (NASDAQ:RRBI) Upcoming Dividend Will Be Larger Than Last Year's

The board of Red River Bancshares, Inc. (NASDAQ:RRBI) has announced that it will be paying its dividend of $0.15 on the 18th of September, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 0.8% is only a modest boost to shareholder returns.

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Red River Bancshares' Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Red River Bancshares has a good history of paying out dividends, with its current track record at 5 years. While past data isn't a guarantee for the future, Red River Bancshares' latest earnings report puts its payout ratio at 7.3%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS is forecast to expand by 6.8%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 9.4% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Red River Bancshares

Red River Bancshares Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2020, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.48. This means that it has been growing its distributions at 15% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Red River Bancshares has grown earnings per share at 8.8% per year over the past five years. Red River Bancshares definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Red River Bancshares Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Red River Bancshares analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.