Regions Financial's (NYSE:RF) Dividend Will Be Increased To US$0.17

The board of Regions Financial Corporation (NYSE:RF) has announced that it will be increasing its dividend on the 3rd of January to US$0.17. This will take the dividend yield to an attractive 2.7%, providing a nice boost to shareholder returns.

See our latest analysis for Regions Financial

Regions Financial's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Regions Financial was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 21.2%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 36%, which is comfortable for the company to continue in the future.

Regions Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the first annual payment was US$0.04, compared to the most recent full-year payment of US$0.68. This works out to be a compound annual growth rate (CAGR) of approximately 33% 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

Investors could be attracted to the stock based on the quality of its payment history. Regions Financial has impressed us by growing EPS at 26% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Regions Financial Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Regions Financial is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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 of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Regions Financial that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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