Stellar Bancorp (NYSE:STEL) Has Announced A Dividend Of $0.13

Stellar Bancorp, Inc.'s (NYSE:STEL) investors are due to receive a payment of $0.13 per share on 30th of September. This payment means the dividend yield will be 1.9%, which is below the average for the industry.

See our latest analysis for Stellar Bancorp

Stellar Bancorp's Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Stellar Bancorp has a good history of paying out dividends, with its current track record at 5 years. Using data from its latest earnings report, Stellar Bancorp's payout ratio sits at 24%, an extremely comfortable number that shows that it can pay its dividend.

Over the next year, EPS is forecast to fall by 6.4%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 30%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Stellar Bancorp's Dividend Has Lacked Consistency

Stellar Bancorp has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 5 years was $0.40 in 2019, and the most recent fiscal year payment was $0.52. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Stellar Bancorp May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Stellar Bancorp has seen earnings per share falling at 3.2% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Stellar Bancorp is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Stellar Bancorp (1 is a bit concerning!) that you should be aware of before investing. Is Stellar Bancorp 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.