ServisFirst Bancshares (NYSE:SFBS) Will Pay A Larger Dividend Than Last Year At $0.28

The board of ServisFirst Bancshares, Inc. (NYSE:SFBS) has announced that it will be paying its dividend of $0.28 on the 10th of April, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 2.1%.

See our latest analysis for ServisFirst Bancshares

ServisFirst Bancshares' Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Having paid out dividends for 9 years, ServisFirst Bancshares has a good history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 21% also shows that ServisFirst Bancshares is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to fall by 2.2% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 24% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

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 $0.10 total annually to $1.12. This means that it has been growing its distributions at 31% per annum over that time. ServisFirst Bancshares has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. ServisFirst Bancshares has seen EPS rising for the last five years, at 21% per annum. 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.

We Really Like ServisFirst Bancshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for ServisFirst Bancshares you should be aware of, and 1 of them is concerning. Is ServisFirst Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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