Provident Financial Holdings, Inc.'s (NASDAQ:PROV) investors are due to receive a payment of $0.14 per share on 6th of June. The dividend yield will be 4.4% based on this payment which is still above the industry average.

View our latest analysis for Provident Financial Holdings

Provident Financial Holdings' Dividend Forecasted To Be Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Provident Financial Holdings has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Provident Financial Holdings' payout ratio of 54% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to expand by 22.4%. If the dividend continues along recent trends, we estimate the future payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

Provident Financial Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $0.40 total annually to $0.56. This means that it has been growing its distributions at 3.4% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

We Could See Provident Financial Holdings' Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Provident Financial Holdings has seen EPS rising for the last five years, at 9.1% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Provident Financial Holdings Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Provident Financial Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.