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Renasant Corporation (NYSE:RNST) has announced that it will pay a dividend of $0.22 per share on the 30th of September. This payment means that the dividend yield will be 2.7%, which is around the industry average.
See our latest analysis for Renasant
Renasant's Payment Expected To Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
Renasant has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Renasant's last earnings report, the payout ratio is at a decent 33%, meaning that the company is able to pay out its dividend with a bit of room to spare.
The next 3 years are set to see EPS grow by 34.1%. Analysts forecast the future payout ratio could be 31% over the same time horizon, which is a number we think the company can maintain.
Renasant Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.68 in 2014, and the most recent fiscal year payment was $0.88. This means that it has been growing its distributions at 2.6% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Renasant has seen earnings per share falling at 4.6% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
An additional note is that the company has been raising capital by issuing stock equal to 13% 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.
Our Thoughts On Renasant's Dividend
Overall, we think Renasant is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.