South State Corporation (NASDAQ:SSB) has announced that it will be increasing its dividend on the 19th of August to US$0.49. This makes the dividend yield about the same as the industry average at 2.6%.
South State's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, South State's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to fall by 0.2%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 36%, which is comfortable for the company to continue in the future.
South State Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2011, the first annual payment was US$0.68, compared to the most recent full-year payment of US$1.96. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Has Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. South State has impressed us by growing EPS at 7.7% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
South State Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that South State is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for South State that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
If you decide to trade South State, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
What are the risks and opportunities for SouthState?
Trading at 46.4% below our estimate of its fair value
Earnings are forecast to grow 9.82% per year
Earnings have grown 33.5% per year over the past 5 years
Shareholders have been diluted in the past year
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
SouthState Corporation operates as the bank holding company for SouthState Bank, National Association that provides a range of banking services and products to individuals and companies.
Flawless balance sheet established dividend payer.