Stock Analysis

Stellar Bancorp (NYSE:STEL) Is Paying Out A Dividend Of $0.13

NYSE:STEL
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Stellar Bancorp, Inc.'s (NYSE:STEL) investors are due to receive a payment of $0.13 per share on 28th of June. The dividend yield is 2.3% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Stellar Bancorp

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

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

Stellar Bancorp is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Despite the company's shorter dividend history however, calculating for its payout ratio of 23% shows that Stellar Bancorp is able to comfortably pay dividends.

EPS is set to fall by 6.4% over the next 12 months. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 29%, which would be comfortable for the company to continue in the future.

historic-dividend
NYSE:STEL Historic Dividend May 27th 2024

Stellar Bancorp's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of $0.40 in 2020 to the most recent total annual payment of $0.52. This means that it has been growing its distributions at 6.8% per annum over that time. 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Stellar Bancorp hasn't seen much change in its earnings per share over the last five years.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Stellar Bancorp's payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

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. Just as an example, we've come across 2 warning signs for Stellar Bancorp you should be aware of, and 1 of them is concerning. 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.