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The board of National Bank Holdings Corporation (NYSE:NBHC) has announced that it will be paying its dividend of $0.26 on the 15th of June, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 3.4%.
View our latest analysis for National Bank Holdings
National Bank Holdings' Payment Expected To Have Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.
National Bank Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 27%, which means that National Bank Holdings would be able to pay its last dividend without pressure on the balance sheet.
The next year is set to see EPS grow by 4.3%. If the dividend continues on this path, the future payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.
National Bank Holdings Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.20, compared to the most recent full-year payment of $1.00. This means that it has been growing its distributions at 17% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. National Bank Holdings has seen EPS rising for the last five years, at 36% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
An additional note is that the company has been raising capital by issuing stock equal to 25% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
We Really Like National Bank Holdings' Dividend
Overall, a dividend increase is always good, and we think that National Bank Holdings is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.