Yahoo Finance Financial Institutions (NASDAQ:FISI) Has Announced That It Will Be Increasing Its Dividend To $0.30
The board of Financial Institutions, Inc. (NASDAQ:FISI) has announced that the dividend on 3rd of April will be increased to $0.30, which will be 3.4% higher than last year's payment of $0.29 which covered the same period. This will take the annual payment to 4.6% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Financial Institutions
Financial Institutions' Earnings Will Easily Cover The Distributions
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, Financial Institutions has a long history of paying out a part of its earnings to shareholders. Based on Financial Institutions' last earnings report, the payout ratio is at a decent 32%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, earnings per share is forecast to fall by 3.5% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 35% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.
Financial Institutions Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $0.56 total annually to $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year 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.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Financial Institutions has seen EPS rising for the last five years, at 11% 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.
We Really Like Financial Institutions' Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Financial Institutions that investors should take into consideration. 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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