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The board of Renasant Corporation (NYSE:RNST) has announced that it will pay a dividend on the 1st of January, with investors receiving $0.22 per share. Including this payment, the dividend yield on the stock will be 2.4%, which is a modest boost for shareholders' returns.
View our latest analysis for Renasant
Renasant's Payment Expected To Have Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Renasant has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 28%, which means that Renasant would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, earnings per share is forecast to fall by 9.7% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 29% over the same time period, which we think the company can easily maintain.
Renasant Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $0.68 total annually to $0.88. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Renasant May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Renasant hasn't seen much change in its earnings per share over the last five years.
An additional note is that the company has been raising capital by issuing stock equal to 13% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
In Summary
Overall, a consistent dividend is a good thing, and we think that Renasant has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
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. As an example, we've identified 1 warning sign for Renasant that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.