Last update on 2024-06-27

Southside Bancshares (SBSI) - Dividend Analysis (Final Score: 7/8)

In-depth analysis of Southside Bancshares (SBSI) dividend policy with a 7/8 score, covering criteria including yield, growth, payout ratio, and stability.

Short Analysis - Dividend Score: 7

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

Southside Bancshares (SBSI) is being analyzed based on 8 criteria to determine its dividend stability and performance. Criteria include dividend yield, growth rate, payout ratio, earnings coverage, cash flow coverage, stability, duration of payments, and stock repurchases. SBSI has a high dividend yield of 4.5338%, above the industry average. Its average annual dividend growth rate is 11.21%, surpassing the 5% requirement. The average payout ratio over 20 years is 46.02%, indicating prudent financial management. However, the dividend coverage by earnings and cash flow shows occasional inconsistencies and issues, with the coverage ratio by earnings primarily below 1 and cash flow coverage showing improvements in recent years but also dips. Dividends have been stable with a CAGR of 10.50% over 20 years, and the company has a long history of payments (26 years). There are also reliable stock repurchases indicating good financial health.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Southside Bancshares (SBSI) demonstrates strong dividend yield and growth, prudent payout ratios, and a long history of payments, making it attractive for income-focused investors. However, caution is advised due to inconsistencies in earnings and cash flow coverage of dividends. For those willing to accept some volatility for high yields and strong growth, SBSI seems worth considering.

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 represents the ratio of a company's annual dividend compared to its share price. It is an important metric for income-focused investors as it indicates how much cash flow they are getting relative to their investment.

Southside Bancshares (SBSI) boasts a dividend yield of 4.5338%, significantly above the industry average of 2.76%. This is a strong indicator of the company's commitment to returning value to shareholders. Over the past two decades, the dividend yield has shown considerable fluctuations but has generally trended upwards, peaking at 6.1322% in 2012 and currently standing at the highest level since then. This high dividend yield, in the current context, should be quite attractive to income-focused investors given it substantially outperforms the industry average. The dividend yield's consistent growth and resilience during different market cycles serve as positive indicators of Southside Bancshares' financial health and management effectiveness.

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

The dividend growth rate assesses how much a company's dividend payments have increased annually over a specified period. This is important because a steadily growing dividend ensures income growth for investors, indicating the financial health and operational success of the company.

Southside Bancshares (SBSI) has exhibited notable variability in its dividend growth rates over the last 20 years, with figures ranging from -26.78% to 50.67%. The average dividend growth rate over this period is approximately 11.21%. Because this average surpasses the 5% threshold, it suggests a generally positive trend in dividend increases, contributing to investor confidence. However, the significant variability and occasional negative growth rates may be concerning for some investors seeking stability. Therefore, while the overall trend in dividend growth is good, the volatility needs to be carefully considered in the context of long-term dividend reliability.

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

The payout ratio indicates the proportion of earnings a company pays to its shareholders in dividends. A sustainable and healthy payout ratio is usually below 65%.

Southside Bancshares (SBSI) has an average payout ratio of 46.02% over the last 20 years, comfortably below the 65% threshold. This suggests that the company maintains a balanced approach to dividend payments and reinvestment into the business. While there was a spike in 2014 where the payout ratio jumped to over 90%, the overall trend has been sustainable. Particularly notable is the drop to 0% in 2023, which could indicate either a halt in dividend payments or exceptional circumstances. This trend indicates prudent financial management generally supportive of long-term shareholder returns.

Dividends Well Covered by Earnings?

Determining whether dividends are well covered by the earnings is crucial because it indicates the company's ability to sustain dividend payments without dipping into its reserves or taking on debt. A healthy dividend coverage ratio, typically over 1, signifies good financial health.

The dividend coverage ratio for Southside Bancshares (SBSI) has oscillated over the years but shows some concerning trends. From 2003 to 2021, the ratio generally remained well below 1, meaning dividends took up a high proportion of earnings, occasionally consuming nearly all of them. For example, in 2008, the ratio stands at 0.306, meaning only about 30% of earnings were enough to cover the dividends. This ratio did not consistently surpass the 0.50 mark, indicating significant strain on earnings when meeting dividend obligations. The drastic fall to 0 in 2023 due to no reported earnings further compounds this worrisome trend. Historically, a coverage ratio below 1 suggests that dividends are not well covered by earnings, potentially jeopardizing future dividend stability.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow. This criterion assesses whether a company’s generated cash flow is adequate to cover its dividend payments. Consistently maintaining dividends at a level comfortably supported by free cash flow is vital for dividend sustainability, reducing the risk of dividend cuts even in economically challenging periods.

The trend in Southside Bancshares’ free cash flow relative to dividend payments reveals ups and downs, implying some potential risks. For several years early in the period (2003-2010), coverage ratios varied substantially (as low as 0.11 and as high as 0.61), showing inconsistent coverage which raises flags about potential dividend sustainability issues during challenging periods. However, in recent years, noteworthy improvements have been seen, especially from 2016 onward, where the coverage ratio has improved significantly except for the last two years where it again showed some decline (2022: 0.21). A high point came in 2020, with a very favorable coverage ratio of 0.65. Ideally, a coverage ratio above 1 (indicating free cash flow that fully covers dividends) is desirable. Nevertheless, SBSI’s consistent improvements in general are promising, but the dips should be continuously monitored. Overall, this recent improvement is positive, but with some caution advised.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividends indicates reliable income for investors seeking regular returns. It highlights the company's consistent financial health and ability to generate steady cash flows.

Over the past 20 years, Southside Bancshares (SBSI) has consistently paid out dividends per share with no year experiencing more than a 20% drop. For instance, the dividend per share increased from $0.2113 in 2003 to $1.42 in 2023—a compound annual growth rate (CAGR) of approximately 10.50%. This signifies strong financial performance and reliable cash flow management. The absence of significant drops also showcases the stability and resilience of SBSI's business model, important for income-focused investors.

Dividends Paid for Over 25 Years?

Analyzing whether Southside Bancshares (SBSI) has paid dividends for over 25 years is crucial. Continuous dividend payments over an extended period signify a company's stable earnings, commitment to returning value to shareholders, and financial robustness. Such consistency is appealing to long-term investors seeking reliable income and indicates strong corporate governance.

Southside Bancshares (SBSI) has consistently paid dividends from 1998 to 2023, spanning 26 years. The dividend per share has generally increased over this period, starting from $0.1395 in 1998 to $1.42 in 2023. This uninterrupted history of dividend payments demonstrates SBSI's solid financial health and reliable earnings. Such a long tenure of dividend payouts is encouraging for income-focused investors seeking stability. Observing an escalating trend in dividend per share also reflects positively on SBSI's profitability and willingness to distribute earnings to shareholders, making it a favorable factor in the company's dividend profile.

Reliable Stock Repurchases Over the Past 20 Years?

Interpretation of Reliable Stock Repurchases Over the Past 20 Years

The data above suggests that Southside Bancshares (SBSI) has had a pattern of reliable stock repurchases over the past two decades. Examining the numbers closely, we can see consistent efforts to buy back shares during certain years such as 2005, 2011, 2013, 2016, 2019, 2020, 2021, and 2022. These repurchases can signal a positive trend for investors, as they often indicate that the company believes its shares are undervalued and it is committing to returning capital to shareholders. Moreover, the average repurchase rate of -2.5006 over the last 20 years can be interpreted as a good sign, suggesting that, on average, the company is shrinking its share count, which could potentially enhance earnings per share (EPS). This trend is generally viewed positively by the market.