The board of Provident Financial Holdings, Inc. (NASDAQ:PROV) has announced that it will pay a dividend on the 5th of September, with investors receiving $0.14 per share. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Provident Financial Holdings

Provident Financial Holdings' 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, Provident Financial Holdings has a long history of paying out a part of its earnings to shareholders. Based on Provident Financial Holdings' last earnings report, the payout ratio is at a decent 54%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to expand by 6.8%. If the dividend continues along recent trends, we estimate the future payout ratio will be 52%, which is in the range that makes us comfortable with the sustainability of the dividend.

Provident Financial Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.40 in 2014, and the most recent fiscal year payment was $0.56. This means that it has been growing its distributions at 3.4% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Provident Financial Holdings Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Provident Financial Holdings has impressed us by growing EPS at 9.3% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Provident Financial Holdings Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. For instance, we've picked out 1 warning sign for Provident Financial Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.