1st Source's (NASDAQ:SRCE) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of 1st Source Corporation (NASDAQ:SRCE) has announced that it will be paying its dividend of $0.38 on the 15th of May, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 2.5% is only a modest boost to shareholder returns.

1st Source'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.

Having distributed dividends for at least 10 years, 1st Source has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but 1st Source's payout ratio of 26% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to expand by 2.4%. If the dividend continues on this path, the future payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for 1st Source

1st Source Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from $0.655 total annually to $1.52. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. 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 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 1st Source has grown earnings per share at 11% 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 1st Source's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. 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 3 analysts we track are forecasting for 1st Source 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.