Stellar Bancorp (NYSE:STEL) Is Increasing Its Dividend To $0.15

Stellar Bancorp, Inc. (NYSE:STEL) has announced that it will be increasing its periodic dividend on the 31st of December to $0.15, which will be 7.1% higher than last year's comparable payment amount of $0.14. Although the dividend is now higher, the yield is only 1.8%, which is below the industry average.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Stellar Bancorp's Dividend Forecasted To Be Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive.

Stellar Bancorp has a good history of paying out dividends, with its current track record at 6 years. Based on Stellar Bancorp's last earnings report, the payout ratio is at a decent 29%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 12.1%. The future payout ratio could be 30% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

View our latest analysis for Stellar Bancorp

Stellar Bancorp's Dividend Has Lacked Consistency

It's comforting to see that Stellar Bancorp has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2019, the dividend has gone from $0.40 total annually to $0.56. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Stellar Bancorp May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Stellar Bancorp's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On Stellar Bancorp's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Stellar Bancorp's payments are rock solid. While Stellar Bancorp is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Stellar Bancorp is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Stellar Bancorp that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.