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

South Plains Financial, Inc.'s (NASDAQ:SPFI) dividend will be increasing from last year's payment of the same period to $0.16 on 11th of August. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.

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

Even a low dividend yield can be attractive if it is sustained for years on end.

South Plains Financial has a good history of paying out dividends, with its current track record at 6 years. Using data from its latest earnings report, South Plains Financial's payout ratio sits at 18%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share is forecast to rise by 3.2% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for South Plains Financial

South Plains Financial Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2019, the dividend has gone from $0.12 total annually to $0.60. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. South Plains Financial has impressed us by growing EPS at 14% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 South Plains Financial analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is South Plains Financial 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.