Stock Yards Bancorp (NASDAQ:SYBT) Is Paying Out A Larger Dividend Than Last Year

Stock Yards Bancorp, Inc. (NASDAQ:SYBT) has announced that it will be increasing its dividend on the 31st of December to US$0.28. This takes the annual payment to 1.7% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Stock Yards Bancorp

Stock Yards Bancorp's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Stock Yards Bancorp'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.

Looking forward, earnings per share is forecast to rise by 6.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Stock Yards Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the first annual payment was US$0.48, compared to the most recent full-year payment of US$1.12. This means that it has been growing its distributions at 8.8% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Stock Yards Bancorp Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Stock Yards Bancorp has grown earnings per share at 7.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Stock Yards Bancorp's prospects of growing its dividend payments in the future.

We'd also point out that Stock Yards Bancorp has issued stock equal to 17% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like Stock Yards 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 company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Stock Yards Bancorp that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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