Simmons First National (NASDAQ:SFNC) Will Pay A Dividend Of US$0.18

Simmons First National Corporation (NASDAQ:SFNC) will pay a dividend of US$0.18 on the 6th of July. This payment means that the dividend yield will be 2.3%, which is around the industry average.

View our latest analysis for Simmons First National

Simmons First National's Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. 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 a sustained record of paying dividends with very little fluctuation. 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.

We Could See Simmons First National's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Simmons First National has impressed us by growing EPS at 8.8% per year over the past five years. Simmons First National definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Simmons First National's Dividend

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. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Simmons First National has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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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