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Independent Bank Group, Inc. (NASDAQ:IBTX) will pay a dividend of $0.38 on the 17th of August. Based on this payment, the dividend yield will be 3.4%, which is fairly typical for the industry.
View our latest analysis for Independent Bank Group
Independent Bank Group's Dividend Forecasted To Be Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.
Having distributed dividends for at least 10 years, Independent Bank Group has a long history of paying out a part of its earnings to shareholders. Based on Independent Bank Group's last earnings report, the payout ratio is at a decent 71%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next year, EPS is forecast to expand by 43.6%. If the dividend continues along recent trends, we estimate the future payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.
Independent Bank Group Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was $0.24, compared to the most recent full-year payment of $1.52. This means that it has been growing its distributions at 20% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Dividend Growth Is Doubtful
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Independent Bank Group's earnings per share has shrunk at approximately 9.8% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In Summary
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.