Bank of South Carolina Corporation (NASDAQ:BKSC) has announced that it will pay a dividend of $0.17 per share on the 31st of October. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.
Bank of South Carolina's 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, Bank of South Carolina has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Bank of South Carolina's payout ratio of 60% is a good sign as this means that earnings decently cover dividends.
If the trend of the last few years continues, EPS will grow by 2.9% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 62%, which is in the range that makes us comfortable with the sustainability of the dividend.
Bank of South Carolina Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from $0.364 total annually to $0.68. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Bank of South Carolina has only grown its earnings per share at 2.9% per annum over the past five years. Bank of South Carolina is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Bank of South Carolina Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Bank of South Carolina might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Bank of South Carolina that investors need to be conscious of moving forward. Is Bank of South Carolina 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.
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