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Renasant Corporation's (NYSE:RNST) investors are due to receive a payment of $0.22 per share on 1st of January. Including this payment, the dividend yield on the stock will be 2.3%, which is a modest boost for shareholders' returns.
See our latest analysis for Renasant
Renasant's Payment Expected To Have Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Renasant has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Renasant's payout ratio of 28% is a good sign as this means that earnings decently cover dividends.
EPS is set to fall by 9.7% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 29% over the same time period, which we think the company can easily maintain.
Renasant Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.68 in 2014, and the most recent fiscal year payment was $0.88. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Renasant May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Unfortunately, Renasant's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
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. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
In Summary
Overall, a consistent dividend is a good thing, and we think that Renasant has the ability to continue this into the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Renasant that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.