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The board of Franklin Financial Services Corporation (NASDAQ:FRAF) has announced that it will pay a dividend on the 28th of August, with investors receiving $0.32 per share. This makes the dividend yield 4.4%, which will augment investor returns quite nicely.
Check out our latest analysis for Franklin Financial Services
Franklin Financial Services' Payment Expected To Have Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
Franklin Financial Services has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Franklin Financial Services' last earnings report, the payout ratio is at a decent 41%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next year, EPS could expand by 18.5% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 37% by next year, which is in a pretty sustainable range.
Franklin Financial Services Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.68 in 2014 to the most recent total annual payment of $1.28. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Franklin Financial Services has been growing its earnings per share at 18% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
Franklin Financial Services Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Franklin Financial Services might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in Franklin Financial Services in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.