First Bank (NASDAQ:FRBA) will pay a dividend of $0.06 on the 23rd of May. This payment means the dividend yield will be 1.7%, which is below the average for the industry.
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Even a low dividend yield can be attractive if it is sustained for years on end.
First Bank has a good history of paying out dividends, with its current track record at 8 years. Using data from its latest earnings report, First Bank’s payout ratio sits at 15%, an extremely comfortable number that shows that it can pay its dividend.
Over the next year, EPS is forecast to expand by 8.9%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 16% by next year, which is in a pretty sustainable range.
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Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2017, the annual payment back then was $0.08, compared to the most recent full-year payment of $0.24. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn’t be inclined to rely on it until a longer track record can be developed.
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. First Bank has seen EPS rising for the last five years, at 20% per annum. First Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for First Bank for free with public analyst estimates for the company. 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.
