Are You Looking for a High-Growth Dividend Stock?

1st Source (SRCE), a Midwest bank holding company, presents an attractive dividend opportunity with a current yield of 2.47%, exceeding the S&P 500's 1.56% but below the Banks-Midwest industry's 3.13%; the company's annualized dividend is $1.52, up 8.6% year-over-year, and has grown an average of 5.43% annually over the past 5 years. With a payout ratio of 25% and an expected EPS growth of 8.01% in 2025 to $5.93 per share, SRCE is positioned for continued dividend growth and carries a Zacks Rank of #2 (Buy).

Analysis

1st Source (SRCE), a holding company in the Finance sector, has exhibited a 5.36% stock price appreciation since the beginning of the year. The company currently distributes a dividend of $0.38 per share, resulting in a dividend yield of 2.47%. This yield surpasses the S&P 500's average of 1.56% but is lower than the Banks - Midwest industry average of 3.13%. Notably, SRCE's annualized dividend of $1.52 reflects an 8.6% increase from the prior year, and the company has demonstrated consistent dividend growth with an average annual increase of 5.43% over the last five years, having raised its dividend four times during this period. Supporting this dividend policy is a conservative payout ratio of 25%, indicating that only a quarter of its trailing 12-month earnings per share is distributed as dividends. Looking ahead, SRCE is projected to experience solid earnings growth, with the Zacks Consensus Estimate for 2025 earnings per share at $5.93, representing an 8.01% year-over-year increase. This positive outlook is further reinforced by a Zacks Rank of #2 (Buy), positioning SRCE as an attractive option for income-focused investors, although it is noted that high-yielding stocks can face challenges in rising interest rate environments.

Key Decisions for Investors

• Investors focused on dividend income and growth may find SRCE an appealing opportunity, given its recent 8.6% annualized dividend increase, a low 25% payout ratio suggesting room for future growth, and projected 2025 EPS growth of 8.01%.
• While SRCE's 2.47% yield is below its direct industry peer average, its outperformance of the broader S&P 500 yield, coupled with a Zacks #2 (Buy) rating, indicates potential for both income generation and capital appreciation.
• Monitor SRCE's ability to maintain its dividend growth trajectory in line with earnings growth, and be cognizant of the potential impact of rising interest rates on financial sector stocks, despite the current positive assessment.