Simmons First National (NASDAQ:SFNC) Will Pay A Dividend Of $0.21

The board of Simmons First National Corporation (NASDAQ:SFNC) has announced that it will pay a dividend of $0.21 per share on the 2nd of January. This means that the annual payment will be 3.4% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Simmons First National

Simmons First National's Dividend Forecasted To Be Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Simmons First National has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 81%, which means that Simmons First National would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 110.9%. Analyst estimates also show the future payout ratio being 47% in the same 3 years which brings it into quite a comfortable range.

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 2014, the dividend has gone from $0.42 total annually to $0.84. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 17% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Simmons First National's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Simmons First National that you should be aware of before investing. Is Simmons First National not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.