ServisFirst Bancshares (NYSE:SFBS) Is Paying Out A Larger Dividend Than Last Year

ServisFirst Bancshares, Inc. (NYSE:SFBS) has announced that it will be increasing its dividend on the 8th of April to US$0.23. Even though the dividend went up, the yield is still quite low at only 0.9%.

View our latest analysis for ServisFirst Bancshares

ServisFirst Bancshares' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, ServisFirst Bancshares' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 7.8%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

ServisFirst Bancshares Doesn't Have A Long Payment History

It is great to see that ServisFirst Bancshares has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2014, the dividend has gone from US$0.10 to US$0.92. This means that it has been growing its distributions at 32% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that ServisFirst Bancshares has grown earnings per share at 20% per year over the past five years. ServisFirst Bancshares definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like ServisFirst Bancshares' Dividend

Overall, a dividend increase is always good, and we think that ServisFirst Bancshares is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 5 ServisFirst Bancshares analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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