Provident Financial Services, Inc. (NYSE:PFS) has announced that it will pay a dividend of $0.24 per share on the 23rd of February. Based on this payment, the dividend yield on the company's stock will be 5.4%, which is an attractive boost to shareholder returns.
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Provident Financial Services 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 Provident Financial Services' payout ratio of 56% is a good sign as this means that earnings decently cover dividends.
Looking forward, EPS is forecast to rise by 45.4% over the next 3 years. Analysts forecast the future payout ratio could be 47% over the same time horizon, which is a number we think the company can maintain.
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $0.52 total annually to $0.96. This means that it has been growing its distributions at 6.3% per annum 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.
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Provident Financial Services hasn't seen much change in its earnings per share over the last five years.
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 5 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is Provident Financial Services 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.