Investar Holding Corporation (NASDAQ:ISTR) will pay a dividend of $0.105 on the 31st of January. Including this payment, the dividend yield on the stock will be 1.9%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Investar Holding

Investar Holding's Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Investar Holding has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 22% also shows that Investar Holding is able to comfortably pay dividends.

Over the next 3 years, EPS is forecast to expand by 32.5%. Analysts estimate the future payout ratio will be 18% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Investar Holding Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.0272 in 2014 to the most recent total annual payment of $0.42. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Investar Holding May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Investar Holding's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Investar Holding Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in Investar Holding stock. Is Investar Holding 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.