S&T Bancorp's (NASDAQ:STBA) Upcoming Dividend Will Be Larger Than Last Year's

S&T Bancorp, Inc. (NASDAQ:STBA) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of May to $0.32. This takes the dividend yield to 4.6%, which shareholders will be pleased with.

View our latest analysis for S&T Bancorp

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

A big dividend yield for a few years doesn't mean much if it can't be sustained.

S&T Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Using data from its latest earnings report, S&T Bancorp's payout ratio sits at 25%, an extremely comfortable number that shows that it can pay its dividend.

EPS is set to fall by 8.1% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 39%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

S&T Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.60 in 2013 to the most recent total annual payment of $1.28. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. 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 Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. S&T Bancorp has impressed us by growing EPS at 10.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for S&T Bancorp's prospects of growing its dividend payments in the future.

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 earnings easily cover the company's distributions, and the company is generating plenty of cash. 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.

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. Taking the debate a bit further, we've identified 1 warning sign for S&T Bancorp 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.