Last update on 2024-06-27

Prosperity Bancshares (PB) - Dividend Analysis (Final Score: 6/8)

Analyze the dividend performance and stability of Prosperity Bancshares (PB) using an 8-criteria scoring system. Discover why it scored 6 out of 8.

Short Analysis - Dividend Score: 6

We're running Prosperity Bancshares (PB) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Prosperity Bancshares (PB) scores a 6 out of 8 on their dividend analysis. The company’s dividend yield at 3.263% is higher than the industry average, showing a good return for investors. Over the past 20 years, their average annual dividend growth rate is approximately 11.67%, also above the 5% mark. The payout ratio stands at a low average of 28.16%, suggesting sustainability, and dividends are well covered by both earnings and cash flow. They have consistently paid and increased dividends since starting in 1999, making them stable for income seekers. However, they fell short of our last criterion – reliable stock repurchases over the past 20 years.

Insights for Value Investors Seeking Stable Income

Prosperity Bancshares shows strong performance in most criteria, making it an attractive choice for dividend-focused investors. While they don't quite hit the 25-year mark for dividend payments or have a high average in stock repurchases, their high yield, stable growth, and low payout ratio offer a solid basis for considering an investment. It is recommended for investors seeking a steady income with growth potential to keep an eye on this stock.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. A higher dividend yield indicates a better return on investment for shareholders.

Prosperity Bancshares currently has a dividend yield of 3.263%, which is higher than the industry average of 2.76%. This suggests a more attractive return for investors compared to its peers. When examining the historical data, we see a consistent upward trend in the dividend yield from 1.1131% in 2003 to the current 3.263% in 2023. This progressive increase demonstrates the company's commitment to returning value to its shareholders over the long term. Additionally, the stock price held relatively stable over the last 20 years, peaking at $72.68 in 2023. Dividends per share have also increased consistently, from $0.252 in 2003 to $2.21 in 2023. This trend indicates that Prosperity Bancshares has successfully managed to grow its earnings and distribute a growing portion of profits to its shareholders. Overall, the higher-than-industry-average dividend yield, coupled with consistent historical growth, makes Prosperity Bancshares an attractive option for dividend-focused investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate tells us how much the company has increased its dividends over a specific period. This criterion examines if the growth rate exceeded 5% annually for the last 20 years.

Based on the data provided, the Dividend Growth Rate fluctuates significantly with values ranging from 4.7393% to 22.2222%. The average of these values is approximately 11.6753%, which is well above the 5% threshold. Specifically, there are only a few years where the growth rate dropped below 5% (e.g., 2023: 4.7393%, 2021: 6.4171%, 2020: 10.6509%), but for the majority, it remained comfortably above 5%. This demonstrates Prosperity Bancshares' strong ability to consistently grow dividends, making it a reliable choice for income-focused investors. Therefore, this overall positive trend is good for the criterion.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio measures the proportion of earnings a company distributes as dividends. It's crucial because a lower payout ratio generally indicates sustainability of dividends.

The average payout ratio for Prosperity Bancshares (PB) over the last 20 years is approximately 28.16%, which is well below the 65% threshold. This low payout ratio suggests that PB has consistently retained a substantial portion of its earnings, potentially for growth and reinvestment. Moreover, the trend of payout ratios over the years shows disciplined financial management, with the highest being 48.96% in 2023. This conservative payout approach is favorable for the long-term sustainability of the dividend, especially during economic downturns. Therefore, PB's average payout ratio is well below the threshold and indicates a solid ability to maintain and possibly grow its dividend over time.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means that the company generates sufficient net income to comfortably pay the dividends without financial strain.

In the case of Prosperity Bancshares (PB), the dividend coverage ratio—calculated as earnings per share divided by dividends per share—plays a significant role in determining financial stability and the sustainability of its dividend payouts. A higher ratio typically reflects a safer dividend. From the data provided for the years 2003 to 2023, it's evident that GDP's coverage ratios generally range from about 0.18 to 0.49. Looking deeper, these figures indicate that PB has steadily grown its EPS while also incrementally increasing its dividends. From 0.185 in 2003 to approximately 0.49 in 2023, the trend shows PB's increasing capacity to cover dividends out of its earnings. This trend is favorable, depicting a robust financial positioning and good management practices. Especially noteworthy is the range between 2008 to 2016 where the coverage ratio hovered between 0.23 and 0.37, suggesting sound dividend policies amidst economic uncertainties, including the 2008 financial crisis. Therefore, PB's dividends appear to be consistently well-covered by its earnings, indicating a strong, reliable income source for investors.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow measures if a company's free cash flow sufficiently covers its dividend payouts. This check is crucial because if dividends regularly exceed cash flow, the company may need to cut dividends or take on debt. A coverage ratio above 1 indicates a healthy buffer.

The free cash flow for Prosperity Bancshares (PB) has shown considerable growth over the years, from $36.03 million in 2003 to $612.2 million in 2023. Comparatively, the dividend payout has also grown, from $4.855 million in 2003 to $205.715 million in 2023. By examining the Dividend covered by Cash Flow ratio, we see fluctuations over the years. During 2007, a significant drop was observed with a ratio of 0.086, indicating that dividends exceeded free cash flow. However, more recent figures show ratios higher than 0.2, and peaking at 0.678 in 2009. Most notably, in 2022 and 2023, the ratios are 0.416 and 0.336, respectively, signaling good financial health as dividends are well covered by cash flow. Hence, the trend is favorable as PB is maintaining an adequate buffer, showing a balanced approach to rewarding shareholders while preserving sufficient liquidity.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years where the dividend per share did not drop by more than 20% are crucial for income-seeking investors as it ensures a predictable and reliable income stream.

Analyzing the dividend per share data for Prosperity Bancshares (PB) from 2003 to 2023 reveals a consistent upward trend without any observable drops exceeding 20% in any given year. For instance, dividends increased from $0.252 in 2003 to $2.21 in 2023, demonstrating not just stability but significant growth. This upward momentum is a positive sign for long-term income-seeking investors as it highlights the company's commitment to rewarding its shareholders reliably and progressively. In the context of prosperity and financial stability, this trend underscores the bank’s strong financial health and its strategic emphasis on shareholder value.

Dividends Paid for Over 25 Years?

Examining if a company has paid dividends for over 25 years is crucial because it demonstrates long-term commitment to returning value to shareholders, indicating a stable and mature company.

Prosperity Bancshares (PB) started paying dividends in 1999, as evidenced by a payout of $0.20 per share for that year. Since then, the company has consistently paid dividends for 24 consecutive years, ending in 2023 with $2.21 per share. Although PB has not yet reached the 25-year mark, their nearly quarter-century of uninterrupted dividend payouts is impressive and suggests a strong commitment to shareholder returns. The trend of steadily increasing dividends is a positive sign. The company’s consistent growth in dividends per share—from $0.20 in 1999 to $2.21 in 2023—not only underscores financial health but also the management’s confidence in future earning potential.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years?

The data shows that Prosperity Bancshares (PB) has increased its number of shares consistently over the past 20 years, starting from 19.5 million in 2003 to 92.9 million in 2023. However, there are a few years where stock repurchases occurred (2016, 2017, 2021, 2022). The average repurchase over the last 20 years is 8.59%.