Updated 3/5/25
1st Source Corporation (NASDAQ: SRCE) is a regional bank with deep roots in Indiana, serving customers with a variety of financial services. For income-focused investors, SRCE presents an interesting opportunity to generate consistent returns through dividends. Let’s take a closer look at its dividend profile and overall financial health to see if it’s a strong candidate for a dividend portfolio.
Key Dividend Metrics
✅ Dividend Yield: 2.29% – Competitive but slightly below its five-year average
✅ Payout Ratio: 26.12% – Low, meaning plenty of room for future growth
✅ Dividend Growth: Consistent history of payments and gradual increases
✅ Five-Year Average Dividend Yield: 2.67% – Current yield is slightly below historical levels
✅ Dividend Safety: Strong earnings and cash flow back up dividend payments
✅ Ex-Dividend Date: February 4, 2025 – Investors need to own shares before this date to receive the next dividend
✅ Dividend Payment Date: February 14, 2025 – The next scheduled payout to shareholders
Dividend Overview
SRCE’s dividend yield sits at 2.29%, offering a reasonable return for income investors. However, it’s slightly below its five-year average of 2.67%, meaning the stock price has likely outpaced dividend growth in recent years. While this might not be ideal for yield-seekers, it does suggest the company is on solid financial footing.
One of the most attractive aspects of SRCE’s dividend is its payout ratio of just 26.12%. A low payout ratio signals that the company retains a large portion of its earnings for reinvestment while still rewarding shareholders. This also suggests that even during economic downturns, SRCE is well-positioned to maintain or even grow its dividend.
Dividend Growth and Safety
Long-term dividend investors should always consider a company’s track record of increasing payouts. While the specific year-over-year growth rates aren’t provided, SRCE has a strong reputation for consistent dividend payments. With a solid financial base and a conservative payout strategy, future increases seem likely, though not necessarily aggressive.
Dividend safety is another crucial factor. With earnings per share at $5.36 and a profit margin of 35.40%, SRCE generates strong enough profits to continue supporting its dividend. Additionally, the company’s operating cash flow of $193.85 million is a reassuring sign that cash flow comfortably covers dividend payments.
Chart Analysis
The chart for 1st Source Corporation (SRCE) reflects an interesting trend over the past year, showcasing key movements that investors should pay attention to.
The stock has experienced a notable uptrend since mid-2024, with higher highs and higher lows forming a bullish structure. The price has stayed above both the 50-day and 200-day moving averages for most of the period, indicating sustained strength. The 50-day moving average has acted as dynamic support, while the 200-day moving average has maintained a steady upward slope, reinforcing the broader trend.
There have been two significant spikes in price, one in late summer and another in early winter, both followed by periods of consolidation. The recent breakout above $65 saw a quick pullback, which appears to be retesting prior resistance levels. The price is currently hovering around the 50-day moving average, suggesting a potential support level.
Volume activity shows spikes during major price movements, particularly during the mid-year rally and the subsequent pullback. Green volume bars during upswings indicate strong buying pressure, while red bars during declines suggest profit-taking rather than aggressive selling.
The RSI has been fluctuating between overbought and neutral levels, with a clear peak during the last major price rally. Recently, it has been cooling off from overbought conditions, aligning with the slight price retracement. If the RSI approaches oversold levels while price stabilizes, it could hint at a potential reversal.
The last five candles suggest mixed sentiment. Wicks on both ends show indecision, with buyers stepping in at lower levels but sellers capping gains near resistance. This type of movement often signals a potential range-bound phase before the next major direction emerges.
Analyst Ratings
Upgrades:
In late January 2025, Piper Sandler analysts upgraded 1st Source Corporation (SRCE) from a “Neutral” to an “Overweight” rating, adjusting the price target from $70 to $72.50. This positive shift was attributed to the company’s robust financial performance, including strong earnings growth and a solid return on equity, reflecting effective management and a capacity for generating shareholder value.
Downgrades:
Conversely, in July 2024, Piper Sandler downgraded SRCE from “Overweight” to “Neutral,” despite raising the price target from $60 to $67.50. This cautious stance stemmed from concerns about the company’s exposure to interest rate fluctuations, which could impact net interest margins and overall profitability. Additionally, the stock’s appreciation had brought it closer to the previous price target, leading analysts to adopt a more neutral outlook.
Consensus Price Target:
As of the latest analyses, SRCE has an average 12-month price target of approximately $70.75, with forecasts ranging from a low of $69 to a high of $72.50. This suggests a potential upside of around 12.92% from the current stock price.
These mixed analyst perspectives underscore the importance of considering both the company’s strong financial metrics and external economic factors when evaluating SRCE’s investment potential.
Earnings Report Summary
1st Source Corporation wrapped up 2024 on a strong note, delivering record-breaking net income of $132.62 million, a solid 6.16% increase from the previous year. The bank’s performance reflects steady growth in its lending business and strong financial management, helping it navigate a shifting economic landscape.
One of the standout highlights was the company’s loan and lease portfolio, which expanded by 5.16% to hit $6.85 billion. This growth shows continued demand for its lending services, signaling confidence from both businesses and individual borrowers. On the deposit side, customer balances also grew by 5.06%, bringing total deposits to $6.73 billion. A steady rise in deposits is always a good sign, showing that customers trust the bank enough to keep their money parked there.
Interest income remained strong, with the company’s net interest margin improving to 3.64% for the year. Despite fluctuations in interest rates, 1st Source found ways to optimize its lending and deposit strategies to maintain profitability. That ability to manage assets efficiently, even in uncertain conditions, speaks volumes about how well the bank operates behind the scenes.
Shareholders had another reason to be pleased, as the company announced a cash dividend of $0.36 per share, marking an incredible 37th straight year of dividend growth. A consistent track record like that isn’t just reassuring—it’s a sign of a company that knows how to deliver long-term value while keeping its financials in check.
Customer satisfaction remains a big focus for 1st Source, with a high Net Promoter Score of 76.4%, reflecting strong loyalty and positive feedback from its client base. The bank is also making strides in digital banking, particularly in instant payment solutions, while staying committed to supporting local businesses in the communities it serves.
All in all, 1st Source Corporation had a strong 2024, with solid earnings, steady loan growth, and a commitment to both customers and shareholders. With strong financials and a clear strategy for the future, the company is in a good position to build on its momentum in the years ahead.
Financial Health and Stability
A company’s ability to pay dividends isn’t just about its earnings—it’s about overall financial health. SRCE has demonstrated steady earnings growth, with net income of $131.4 million and a year-over-year earnings increase of 10.60%. Revenue has also grown by 6.30% over the same period, indicating the company continues to expand its business while maintaining profitability.
Looking at the balance sheet, SRCE holds $141.25 million in cash and $359.92 million in debt. While debt levels are always something to watch, the company’s strong earnings and cash flow suggest that its financial position remains stable. Book value per share stands at $45.31, reflecting a solid asset base.
Valuation and Stock Performance
For investors considering valuation, SRCE appears reasonably priced with a price-to-earnings ratio of 11.73. This falls within a fair range compared to industry peers. The price-to-book ratio of 1.39 suggests that the stock is trading close to its intrinsic value, meaning it isn’t overly expensive relative to its assets.
On the performance side, the stock has moved between $47.30 and $68.13 over the past year. It currently sits above both its 50-day and 200-day moving averages, which indicates positive momentum. With a five-year beta of 0.77, SRCE is less volatile than the overall market, making it a more stable option for dividend investors who prefer lower-risk stocks.
Risks and Considerations
While SRCE is a strong dividend-paying stock, no investment is without risks. As a regional bank, it’s sensitive to interest rate changes that can impact profitability. A slowing economy or a downturn in loan performance could also affect earnings and, by extension, its ability to maintain dividend growth.
Another consideration is dividend growth itself. While the company has a history of steady payouts, it hasn’t been particularly aggressive in raising its dividend. Investors looking for rapid dividend increases may find other financial stocks with higher growth rates.
Final Thoughts
1st Source Corporation presents a compelling case for dividend investors who prioritize stability and financial strength. Its low payout ratio, strong profitability, and consistent cash flow make its dividend relatively safe, while its valuation remains reasonable. The stock’s current yield of 2.29% is lower than its historical average, which may not be ideal for income-focused investors seeking a higher return, but its solid fundamentals provide confidence in the sustainability of its payouts.
For those looking for a reliable dividend stock with lower volatility and steady performance, SRCE remains a solid option. However, investors focused on high-yield or aggressive dividend growth may want to explore alternatives.
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