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The board of Renasant Corporation (NYSE:RNST) has announced that it will pay a dividend on the 31st of March, with investors receiving $0.22 per share. Based on this payment, the dividend yield will be 2.6%, which is fairly typical for the industry.
View 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 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 Renasant would be able to pay its last dividend without pressure on the balance sheet.
Over the next 3 years, EPS is forecast to expand by 2.6%. The future payout ratio could be 26% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Renasant Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from $0.68 total annually to $0.88. This means that it has been growing its distributions at 2.6% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Renasant May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, Renasant's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
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.
Renasant Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.