Southside Bancshares (NASDAQ:SBSI) Is Paying Out A Larger Dividend Than Last Year

Southside Bancshares, Inc. (NASDAQ:SBSI) will increase its dividend on the 3rd of March to US$0.34. This takes the dividend yield to 3.3%, which shareholders will be pleased with.

See our latest analysis for Southside Bancshares

Southside Bancshares' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Southside Bancshares was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 17.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 52%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was US$0.62 in 2012, and the most recent fiscal year payment was US$1.42. This means that it has been growing its distributions at 8.7% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Southside Bancshares might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see Southside Bancshares has been growing its earnings per share at 14% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Southside 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 earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Southside Bancshares you should be aware of, and 1 of them is a bit concerning. 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.