Sound Financial Bancorp (NASDAQ:SFBC) Will Pay A Dividend Of US$0.17

The board of Sound Financial Bancorp, Inc. (NASDAQ:SFBC) has announced that it will pay a dividend on the 24th of May, with investors receiving US$0.17 per share. This payment means the dividend yield will be 2.0%, which is below the average for the industry.

View our latest analysis for Sound Financial Bancorp

Sound Financial Bancorp's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Sound Financial Bancorp's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 7.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sound Financial Bancorp Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from US$0.20 in 2013 to the most recent annual payment of US$0.78. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Sound Financial Bancorp Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Sound Financial Bancorp has seen EPS rising for the last five years, at 7.4% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, a consistent dividend is a good thing, and we think that Sound Financial Bancorp has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Sound Financial Bancorp that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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