Sound Financial Bancorp, Inc. (NASDAQ:SFBC) will pay a dividend of $0.19 on the 23rd of May. The dividend yield is 1.5% based on this payment, which is a little bit low compared to the other companies in the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in Sound Financial Bancorp. Read for free now.

Sound Financial Bancorp's Dividend Forecasted To Be Well Covered By Earnings

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

Sound Financial Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Sound Financial Bancorp's last earnings report, the payout ratio is at a decent 29%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS could fall by 4.3% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the future payout ratio could be 45%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Sound Financial Bancorp

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was $0.20, compared to the most recent full-year payment of $0.76. This means that it has been growing its distributions at 14% per annum over that time. Sound Financial Bancorp has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Sound Financial Bancorp's earnings per share has fallen at approximately 4.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Sound Financial Bancorp's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Sound Financial Bancorp has been making. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Sound Financial Bancorp that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.