Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see First Bancorp (NASDAQ:FBNC) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Meaning, you will need to purchase First Bancorp’s shares before the 30th of June to receive the dividend, which will be paid on the 25th of July.
The company’s next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$0.88 per share. Based on the last year’s worth of payments, First Bancorp stock has a trailing yield of around 2.1% on the current share price of US$42.12. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether First Bancorp can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. First Bancorp paid out a comfortable 42% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
See our latest analysis for First Bancorp
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. First Bancorp’s earnings per share have fallen at approximately 7.5% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, First Bancorp has lifted its dividend by approximately 11% a year on average.
