1st Source Corporation (NASDAQ:SRCE) will increase its dividend on the 12th of August to $0.32, which is 3.2% higher than last year's payment from the same period of $0.31. The payment will take the dividend yield to 2.6%, which is in line with the average for the industry.
1st Source's Earnings Will Easily Cover The Distributions
We aren't too impressed by dividend yields unless they can be sustained over time.
Having distributed dividends for at least 10 years, 1st Source has a long history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, 1st Source's latest earnings report puts its payout ratio at 13%, showing that the company can pay out its dividends comfortably.
Over the next 3 years, EPS is forecast to fall by 9.2%. However, as estimated by analysts, the future payout ratio could be 30% over the same time period, which we think the company can easily maintain.
1st Source 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 $0.582 total annually to $1.24. This means that it has been growing its distributions at 7.9% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. 1st Source has seen EPS rising for the last five years, at 14% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
1st Source Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that 1st Source is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for 1st Source that investors should know about before committing capital to this stock. Is 1st Source not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here