Provident Financial Services (NYSE:PFS) Will Pay A Dividend Of $0.24

Provident Financial Services, Inc. (NYSE:PFS) has announced that it will pay a dividend of $0.24 per share on the 26th of May. This makes the dividend yield 5.5%, which will augment investor returns quite nicely.

See our latest analysis for Provident Financial Services

Provident Financial Services' Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Provident Financial Services has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Provident Financial Services' payout ratio of 41% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to rise by 21.1% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Provident Financial Services Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was $0.52, compared to the most recent full-year payment of $0.96. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Provident Financial Services has impressed us by growing EPS at 8.6% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Provident Financial Services Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Provident Financial Services that you should be aware of before investing. Is Provident Financial Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.