Investar holding company (NASDAQ: ISTR) announced that it will increase its dividend on October 29 to $ 0.08. Despite this increase, the 1.4% dividend yield is only a modest boost to returns for shareholders.
See our latest analysis for Investar Holding
Investar Holding payout has strong earnings coverage
If predictable over a long period of time, even low dividend yields can be attractive. However, Investar Holding’s profits easily cover the dividend. This means that most of what the business earns is used to help it grow.
Next year, EPS is expected to grow by 21.7%. If the dividend continues on that path, the payout ratio could reach 17% by next year, which we believe may be quite sustainable going forward.
Investar Holding continues to build its track record
It’s good to see that Investar Holding has been paying a stable dividend for a number of years now, but we want to be a little cautious as to whether this will hold true throughout a full economic cycle. The dividend went from US $ 0.027 in 2014 to the most recent annual payment of US $ 0.32. This works out to a compound annual growth rate (CAGR) of around 42% per year over that time period. We’re not too excited about the relatively short history of dividend payments, but the dividend is growing at a good pace and we could take a closer look.
The dividend seems likely to increase
Investors might be attracted to the stock depending on the quality of its payment history. Investar Holding has seen its EPS increase over the past five years, to 13% per year. With decent growth and a low payout ratio, we think this bodes well for Investar Holding’s prospects of increasing its dividend payouts going forward.
We really like the dividend from Investar Holding
In summary, it is always positive to see the dividend increase and we are particularly satisfied with its overall sustainability. Profits easily cover distributions and the company generates a lot of cash. All of these factors taken into account, we believe this has strong potential as a dividend-paying stock.
Companies with a stable dividend policy are likely to benefit from greater investor interest than those with a more inconsistent approach. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. Taking the debate a little further, we identified 1 warning sign for Investar Holding that investors need to be aware of going forward. If you are a dividend investor, you can also view our organized list of high performing dividend stocks.
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