Veritex Holdings (NASDAQ:VBTX) Is Increasing Its Dividend To $0.22

Veritex Holdings, Inc. (NASDAQ:VBTX) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of May to $0.22. This makes the dividend yield about the same as the industry average at 3.8%.

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Veritex Holdings' Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

Veritex Holdings has a good history of paying out dividends, with its current track record at 6 years. Past distributions do not necessarily guarantee future ones, but Veritex Holdings' payout ratio of 40% is a good sign for current shareholders as this means that earnings decently cover dividends.

The next year is set to see EPS grow by 8.3%. If the dividend continues along recent trends, we estimate the future payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Veritex Holdings

Veritex Holdings Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of $0.50 in 2019 to the most recent total annual payment of $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 9.9% a year over that time. Veritex Holdings has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

Veritex Holdings May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 4.3% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Veritex Holdings for free with public analyst estimates for the company. 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.