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The board of Southern States Bancshares, Inc. (NASDAQ:SSBK) has announced that it will pay a dividend of $0.09 per share on the 15th of November. The dividend yield is 1.2% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for Southern States Bancshares
Southern States Bancshares' Dividend Forecasted To Be Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end.
Having paid out dividends for only 3 years, Southern States Bancshares does not have much of a history being a dividend paying company. While it has a shorter history of paying out dividends, Southern States Bancshares' payout ratio of 10% is a great sign for current shareholders, as this means that earnings greatly cover dividends.
Over the next 3 years, EPS is forecast to expand by 29.8%. Analysts forecast the future payout ratio could be 8.6% over the same time horizon, which is a number we think the company can maintain.
Southern States Bancshares Doesn't Have A Long Payment History
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The most recent annual payment of $0.36 is about the same as the annual payment 3 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Southern States Bancshares has seen EPS rising for the last five years, at 32% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
An additional note is that the company has been raising capital by issuing stock equal to 12% 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 Southern States Bancshares' Dividend
Overall, we like to see the dividend staying consistent, and we think Southern States Bancshares might even raise payments in the future. 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.