BancorpSouth Bank (NYSE:BXS) Has Affirmed Its Dividend Of US$0.19

The board of BancorpSouth Bank (NYSE:BXS) has announced that it will pay a dividend on the 1st of July, with investors receiving US$0.19 per share. This payment means that the dividend yield will be 2.5%, which is around the industry average.

View our latest analysis for BancorpSouth Bank

BancorpSouth Bank's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, BancorpSouth Bank was paying only paying out a fraction of earnings, but the payment was a massive 162% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

EPS is set to fall by 27.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 45%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2011, the first annual payment was US$0.88, compared to the most recent full-year payment of US$0.76. The dividend has shrunk at around 1.5% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. BancorpSouth Bank has impressed us by growing EPS at 17% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for BancorpSouth Bank's prospects of growing its dividend payments in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about BancorpSouth Bank's payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for BancorpSouth Bank that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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