S&T Bancorp's (NASDAQ:STBA) Shareholders Will Receive A Bigger Dividend Than Last Year

S&T Bancorp, Inc. (NASDAQ:STBA) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of November to $0.33. This will take the annual payment to 5.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for S&T Bancorp

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, S&T Bancorp has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, S&T Bancorp's payout ratio sits at 8.4%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share is forecast to fall by 26.2% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 41% over the same time period, which we think the company can easily maintain.

S&T Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.60 in 2013 to the most recent total annual payment of $1.28. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

S&T Bancorp Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. S&T Bancorp has seen EPS rising for the last five years, at 8.9% per annum. S&T Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

S&T Bancorp Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for S&T Bancorp that investors should take into consideration. 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.