Investar Holding Corporation (NASDAQ:ISTR) will pay a dividend of $0.10 on the 31st of October. Based on this payment, the dividend yield will be 3.4%, which is fairly typical for the industry.

Check out our latest analysis for Investar Holding

Investar Holding's Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Investar Holding has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Investar Holding's latest earnings report puts its payout ratio at 14%, showing that the company can pay out its dividends comfortably.

EPS is set to fall by 42.1% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 31%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Investar Holding Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 9 years was $0.0272 in 2014, and the most recent fiscal year payment was $0.40. This works out to be a compound annual growth rate (CAGR) of approximately 35% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Investar Holding has been growing its earnings per share at 19% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Investar Holding's Dividend

Overall, we like to see the dividend staying consistent, and we think Investar Holding might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Investar Holding (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.