S&T Bancorp, Inc. (NASDAQ:STBA) will increase its dividend from last year's comparable payment on the 18th of August to $0.30. This takes the dividend yield to 4.1%, which shareholders will be pleased with.

View our latest analysis for S&T Bancorp

S&T Bancorp's Earnings Will Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

S&T Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on S&T Bancorp's last earnings report, the payout ratio is at a decent 43%, 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 1.7%. Analysts estimate the future payout ratio will be 42% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

S&T Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from $0.60 total annually to $1.20. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 3.9% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 3.9% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

S&T Bancorp Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for S&T Bancorp (1 is a bit concerning!) that you should be aware of before investing. Is S&T Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.