Bank7 Corp. (NASDAQ:BSVN) revealed on Tuesday an increase in its dividend from the previous year's comparable payment, set to be distributed on October 10th. The new dividend amount will be $0.21, aligning the dividend yield to 3.4%, a figure that is in line with industry averages.
Having only been distributing earnings to shareholders for four years, Bank7 is starting to establish its capacity for regular dividends. Its payout ratio of 15% suggests a comfortable ability to pay dividends, despite its relatively short dividend history.
The company's earnings per share (EPS) are projected to decrease by 3.8% in the forthcoming year. However, if the dividend continues to follow recent trends, the future payout ratio could drop to 12%. This scenario would leave a substantial portion of the company's earnings available for business growth.
Although Bank7's track record for dividend payments is still being established, it has not experienced any major cuts in its dividends in the past. The annual dividend has increased from $0.40 in 2019 to $0.84 recently, corresponding to a compound annual growth rate (CAGR) of approximately 20%. Despite this rapid growth in dividends, the short payment history raises questions about its sustainability over a full market cycle.
Investors may find Bank7's dividend history appealing. The company's earnings per share have been growing at a modest rate of 4.1% per year. Although this growth is slow, the low dividend payout ratio suggests that dividends could potentially grow faster than earnings if Bank7 chooses to increase its payout ratio.
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