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

The board of Simmons First National Corporation (NASDAQ:SFNC) has announced that the dividend on 1st of April will be increased to $0.2125, which will be 1.2% higher than last year's payment of $0.21 which covered the same period. This makes the dividend yield about the same as the industry average at 3.8%.

See our latest analysis for Simmons First National

Simmons First National's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Simmons First National has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Simmons First National's payout ratio of 81% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 100.4%. Analyst estimates also show the future payout ratio being 50% in the same 3 years which brings it into quite a comfortable range.

Simmons First National Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $0.44, compared to the most recent full-year payment of $0.84. This means that it has been growing its distributions at 6.7% 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.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Simmons First National's earnings per share has shrunk at 17% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Simmons First National's payments are rock solid. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think Simmons First National is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Simmons First National that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.