Veritex Holdings (NASDAQ:VBTX) Will Pay A Dividend Of $0.20

The board of Veritex Holdings, Inc. (NASDAQ:VBTX) has announced that it will pay a dividend on the 28th of February, with investors receiving $0.20 per share. This payment means that the dividend yield will be 3.0%, which is around the industry average.

View our latest analysis for Veritex Holdings

Veritex Holdings' Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Veritex Holdings has established itself as a dividend paying company, given its 6-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 41%shows that Veritex Holdings would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 37.3%. Analysts estimate the future payout ratio will be 34% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Veritex Holdings Doesn't Have A Long Payment History

It is great to see that Veritex Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2019, the annual payment back then was $0.50, compared to the most recent full-year payment of $0.80. This implies that the company grew its distributions at a yearly rate of about 8.1% over that duration. Veritex Holdings has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Veritex Holdings has only grown its earnings per share at 2.9% per annum over the past five years. Growth of 2.9% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, we think Veritex Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Taking the debate a bit further, we've identified 1 warning sign for Veritex Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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