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 periodic dividend on the 21st of November to $0.34, which will be 3.0% higher than last year's comparable payment amount of $0.33. This makes the dividend yield about the same as the industry average at 3.5%.

Check out our latest analysis for S&T Bancorp

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

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

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 9.4%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to fall by 12.9%. Fortunately, analysts forecast the future payout ratio to be 44% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

S&T Bancorp 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. The annual payment during the last 10 years was $0.64 in 2014, and the most recent fiscal year payment was $1.32. This works out to be a compound annual growth rate (CAGR) of approximately 7.5% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 3.4% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, S&T Bancorp has the option to increase the payout ratio to return more cash to shareholders.

We Really Like S&T Bancorp's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 1 warning sign for S&T Bancorp that investors should take into consideration. Is S&T Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.