Regions Financial (NYSE:RF) Is Paying Out A Larger Dividend Than Last Year

Regions Financial Corporation (NYSE:RF) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of October to $0.24. This makes the dividend yield 5.2%, which is above the industry average.

See our latest analysis for Regions Financial

Regions Financial's Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Regions Financial has a long history of paying out a part of its earnings to shareholders. Based on Regions Financial's last earnings report, the payout ratio is at a decent 34%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 1.2% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 42% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Regions Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.04 in 2013, and the most recent fiscal year payment was $0.96. This works out to be a compound annual growth rate (CAGR) of approximately 37% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Regions Financial has grown earnings per share at 15% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Regions Financial 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. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Regions Financial that investors need to be conscious of moving forward. Is Regions Financial not quite the opportunity you were looking for? Why not check out our selection of top 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.