Stock Analysis

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

NasdaqGS:SFNC
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Simmons First National Corporation (NASDAQ:SFNC) will pay a dividend of US$0.18 on the 4th of October. This means the dividend yield will be fairly typical at 2.6%.

See our latest analysis for Simmons First National

Simmons First National's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Simmons First National was paying only paying out a fraction of earnings, but the payment was a massive 221% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to fall by 8.5%. If the dividend continues along recent trends, we estimate the payout ratio could be 35%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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NasdaqGS:SFNC Historic Dividend August 3rd 2021

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. Since 2011, the first annual payment was US$0.38, compared to the most recent full-year payment of US$0.72. This means that it has been growing its distributions at 6.6% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Simmons First National Could Grow Its Dividend

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 9.6% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Simmons First National's payments, as there could be some issues with sustaining them into the future. While Simmons First National is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 Simmons First National analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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