Prosperity Bancshares (NYSE:PB) Is Increasing Its Dividend To $0.60

Prosperity Bancshares, Inc.'s (NYSE:PB) periodic dividend will be increasing on the 2nd of January to $0.60, with investors receiving 3.4% more than last year's $0.58. This takes the annual payment to 3.7% of the current stock price, which is about average for the industry.

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Prosperity Bancshares' Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Prosperity Bancshares has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Prosperity Bancshares' payout ratio of 42% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 24.8%. The future payout ratio could be 37% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

View our latest analysis for Prosperity Bancshares

Prosperity Bancshares Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $1.09 in 2015 to the most recent total annual payment of $2.32. This means that it has been growing its distributions at 7.8% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Prosperity Bancshares May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, Prosperity Bancshares' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company has been growing at a pretty soft 1.8% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Prosperity Bancshares Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Prosperity Bancshares that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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