Equity Bancshares' (NYSE:EQBK) Upcoming Dividend Will Be Larger Than Last Year's

Equity Bancshares, Inc. (NYSE:EQBK) has announced that it will be increasing its periodic dividend on the 15th of October to $0.15, which will be 25% higher than last year's comparable payment amount of $0.12. Despite this raise, the dividend yield of 1.2% is only a modest boost to shareholder returns.

View our latest analysis for Equity Bancshares

Equity Bancshares' Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Having paid out dividends for only 3 years, Equity Bancshares does not have much of a history being a dividend paying company. Diving into the company's earnings report, the payout ratio is set at 75%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

The next year is set to see EPS grow by 74.2%. Under the assumption that the dividend will continue along recent trends, we think the future payout ratio could be 57% which would be quite comfortable going to take the dividend forward.

Equity Bancshares Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of $0.32 in 2021 to the most recent total annual payment of $0.48. This means that it has been growing its distributions at 14% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Equity Bancshares' EPS has fallen by approximately 17% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Our Thoughts On Equity Bancshares' Dividend

Overall, we always like to see the dividend being raised, but we don't think Equity Bancshares will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Equity Bancshares 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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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.