S&T Bancorp (NASDAQ:STBA) Has Announced That It Will Be Increasing Its Dividend To $0.32

S&T Bancorp, Inc. (NASDAQ:STBA) will increase its dividend from last year's comparable payment on the 23rd of February to $0.32. This makes the dividend yield 3.6%, which is above the industry average.

View our latest analysis for S&T Bancorp

S&T Bancorp's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

S&T Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on S&T Bancorp's last earnings report, the payout ratio is at a decent 35%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 5.9% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 38% over the same time period, which we think the company can easily maintain.

S&T Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.60, compared to the most recent full-year payment of $1.28. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that S&T Bancorp has been growing its earnings per share at 11% a 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 S&T Bancorp's Dividend

Overall, a dividend increase is always good, and we think that S&T Bancorp 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. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for S&T Bancorp that you should be aware of before investing. 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.