The First Bancorp, Inc. (NASDAQ:FNLC) will increase its dividend on the 18th of July to $0.37, which is 2.8% higher than last year’s payment from the same period of $0.36. This will take the annual payment to 5.5% of the stock price, which is above what most companies in the industry pay.
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
First Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company’s payout ratio shows 57%, which means that First Bancorp would be able to pay its last dividend without pressure on the balance sheet.
Over the next year, EPS could expand by 1.0% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 61% by next year, which is in a pretty sustainable range.
Check out our latest analysis for First Bancorp
The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.84 total annually to $1.44. This means that it has been growing its distributions at 5.5% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Investors could be attracted to the stock based on the quality of its payment history. However, First Bancorp’s EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 1.0% per annum, and is paying out quite a lot of its earnings to shareholders. This isn’t bad in itself, but unless earnings growth pick up we wouldn’t expect dividends to grow either.
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we’ve picked out 1 warning sign for First Bancorp that investors should know about before committing capital to this stock. Is First Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
