1st Source (NASDAQ:SRCE) Is Due To Pay A Dividend Of $0.32

1st Source Corporation (NASDAQ:SRCE) will pay a dividend of $0.32 on the 11th of August. This payment means that the dividend yield will be 2.8%, which is around the industry average.

Check out our latest analysis for 1st Source

1st Source's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, 1st Source has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, 1st Source's payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share is forecast to fall by 19.0% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 33%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

1st Source Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.618 in 2013, and the most recent fiscal year payment was $1.28. This implies that the company grew its distributions at a yearly rate of about 7.5% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. 1st Source has impressed us by growing EPS at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for 1st Source's prospects of growing its dividend payments in the future.

We Really Like 1st Source's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for 1st Source that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.