Prosperity Bancshares (NYSE:PB) Is Increasing Its Dividend To $0.55

Prosperity Bancshares, Inc. (NYSE:PB) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of January to $0.55. The payment will take the dividend yield to 3.0%, which is in line with the average for the industry.

Check out our latest analysis for Prosperity Bancshares

Prosperity Bancshares' Payment Expected To Have Solid Earnings Coverage

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

Having distributed dividends for at least 10 years, Prosperity Bancshares has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Prosperity Bancshares' payout ratio of 37% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 22.2% over the next 3 years. The future payout ratio could be 34% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Prosperity Bancshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.78 in 2012 to the most recent total annual payment of $2.20. This means that it has been growing its distributions at 11% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Prosperity Bancshares has impressed us by growing EPS at 7.4% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Prosperity Bancshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 12 Prosperity Bancshares analysts we track are forecasting continued growth with our free report on 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.