Summit State Bank (NASDAQ:SSBI) will pay a dividend of $0.12 on the 23rd of May. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.

View our latest analysis for Summit State Bank

Summit State Bank's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having distributed dividends for at least 10 years, Summit State Bank has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 24% also shows that Summit State Bank is able to comfortably pay dividends.

If the trend of the last few years continues, EPS will grow by 20.6% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Summit State Bank Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $0.32, compared to the most recent full-year payment of $0.48. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Summit State Bank has impressed us by growing EPS at 21% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Summit State Bank's 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. 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. As an example, we've identified 1 warning sign for Summit State Bank that you should be aware of before investing. 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.