Provident Financial Holdings, Inc.'s (NASDAQ:PROV) investors are due to receive a payment of $0.14 per share on 7th of December. This payment means that the dividend yield will be 4.7%, which is around the industry average.

See our latest analysis for Provident Financial Holdings

Provident Financial Holdings' Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Provident Financial Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Provident Financial Holdings' last earnings report, the payout ratio is at a decent 48%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 9.7%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 46% by next year, which is in a pretty sustainable range.

Provident Financial Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.28 in 2013 to the most recent total annual payment of $0.56. This means that it has been growing its distributions at 7.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Provident Financial Holdings has grown earnings per share at 16% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Provident Financial Holdings' Dividend

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. 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. Is Provident Financial Holdings 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.