The board of Veritex Holdings, Inc. (NASDAQ:VBTX) has announced that it will pay a dividend on the 22nd of November, with investors receiving $0.20 per share. This means the dividend yield will be fairly typical at 3.0%.
Check out our latest analysis for Veritex Holdings
Veritex Holdings’ Earnings Will Easily Cover The Distributions
We aren’t too impressed by dividend yields unless they can be sustained over time.
Veritex Holdings has a good history of paying out dividends, with its current track record at 6 years. Taking data from its last earnings report, calculating for the company’s payout ratio of 51%shows that Veritex Holdings would be able to pay its last dividend without pressure on the balance sheet.
The next 3 years are set to see EPS grow by 56.1%. The future payout ratio could be 34% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Veritex Holdings Is Still Building Its Track Record
It is great to see that Veritex Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.50 in 2018 to the most recent total annual payment of $0.80. This implies that the company grew its distributions at a yearly rate of about 8.1% over that duration. Veritex Holdings has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.
The Dividend’s Growth Prospects Are Limited
The company’s investors will be pleased to have been receiving dividend income for some time. Unfortunately, Veritex Holdings’ earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Veritex Holdings is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn’t have the growth potential we look for going into the future.
In Summary
Overall, we think Veritex Holdings is a solid choice as a dividend stock, even though the dividend wasn’t raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company’s dividend record. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we’ve identified 2 warning signs for Veritex Holdings that investors need to be conscious of moving forward. Is Veritex Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.
