Simmons First National (NASDAQ:SFNC) Is Due To Pay A Dividend Of US$0.18

The board of Simmons First National Corporation (NASDAQ:SFNC) has announced that it will pay a dividend on the 6th of July, with investors receiving US$0.18 per share. This payment means that the dividend yield will be 2.3%, which is around the industry average.

See our latest analysis for Simmons First National

Simmons First National's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Simmons First National's dividend was only 31% of earnings, however it was paying out 221% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to fall by 6.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 36%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Simmons First National Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from US$0.38 in 2011 to the most recent annual payment of US$0.72. This means that it has been growing its distributions at 6.6% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Simmons First National has impressed us by growing EPS at 8.8% per 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.

Our Thoughts On Simmons First National's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Simmons First National that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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