Simmons First National Corporation (NASDAQ:SFNC) has announced that it will pay a dividend of $0.2125 per share on the 1st of July. Based on this payment, the dividend yield on the company's stock will be 4.2%, which is an attractive boost to shareholder returns.

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Simmons First National's Dividend Forecasted To Be Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having distributed dividends for at least 10 years, Simmons First National has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 72%, which means that Simmons First National would be able to pay its last dividend without pressure on the balance sheet.

The next year is set to see EPS grow by 26.3%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 62% by next year, which is in a pretty sustainable range.NasdaqGS:SFNC Historic Dividend May 13th 2025

See our latest analysis for Simmons First National

Simmons First National Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.44 in 2015 to the most recent total annual payment of $0.85. This means that it has been growing its distributions at 6.8% 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 Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Simmons First National's EPS has declined at around 15% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Simmons First National's Dividend

Overall, a consistent dividend is a good thing, and we think that Simmons First National has the ability to continue this into the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Story Continues

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 6 analysts we track are forecasting for the future. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.

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