Stock Analysis

Simmons First National's (NASDAQ:SFNC) Upcoming Dividend Will Be Larger Than Last Year's

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Simmons First National Corporation's (NASDAQ:SFNC) dividend will be increasing from last year's payment of the same period to $0.20 on 3rd of July. This will take the dividend yield to an attractive 4.9%, providing a nice boost to shareholder returns.

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Simmons First National's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Simmons First National has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Simmons First National's last earnings report, the payout ratio is at a decent 41%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 6.0%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 42% by next year, which is in a pretty sustainable range.

NasdaqGS:SFNC Historic Dividend June 1st 2023

Simmons First National Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.80. This means that it has been growing its distributions at 7.2% per annum over that time. 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 May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 3.2% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 3.2% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

We Really Like Simmons First National's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Simmons First National for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.