South Plains Financial's (NASDAQ:SPFI) Shareholders Will Receive A Bigger Dividend Than Last Year

South Plains Financial, Inc. (NASDAQ:SPFI) will increase its dividend from last year's comparable payment on the 13th of February to $0.13. This takes the annual payment to 1.7% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for South Plains Financial

South Plains Financial's Dividend Forecasted To Be Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having paid out dividends for only 3 years, South Plains Financial does not have much of a history being a dividend paying company. While it has a shorter history of paying out dividends, South Plains Financial's payout ratio of 13% is a great sign for current shareholders, as this means that earnings greatly cover dividends.

Over the next 3 years, EPS is forecast to fall by 33.1%. However, as estimated by analysts, the future payout ratio could be 21% over the same time period, which we think the company can easily maintain.

South Plains Financial Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2020, the dividend has gone from $0.12 total annually to $0.48. This implies that the company grew its distributions at a yearly rate of about 59% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that South Plains Financial has grown earnings per share at 17% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for South Plains Financial's prospects of growing its dividend payments in the future.

We Really Like South Plains Financial's Dividend

Overall, a dividend increase is always good, and we think that South Plains Financial is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for South Plains Financial (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.