Stellar Bancorp, Inc. (NYSE:STEL) will pay a dividend of $0.13 on the 30th of September. The dividend yield is 1.9% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for Stellar Bancorp
Stellar Bancorp’s Dividend Forecasted To Be Well Covered By Earnings
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.
EPS is set to fall by 6.4% over the next 12 months. But if the dividend continues along recent trends, we estimate the future payout ratio could be 30%, which we would consider to be quite comfortable looking forward, with most of the company’s earnings left over to grow the business in the future.
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 $0.52. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. 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.
Dividend Growth May Be Hard To Achieve
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. It’s not great to see that Stellar Bancorp’s earnings per share has fallen at approximately 3.2% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
In Summary
Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Stellar Bancorp has been making. This company is not in the top tier of income providing stocks.
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. To that end, Stellar Bancorp has 2 warning signs (and 1 which is a bit concerning) we think you should know about. 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.
Source: it.finance.yahoo.com
