First Bank (NASDAQ:FRBA) will pay a dividend of $0.06 on the 22nd of August. Including this payment, the dividend yield on the stock will be 1.6%, which is a modest boost for shareholders’ returns.
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.
Having paid out dividends for 9 years, First Bank has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, First Bank’s payout ratio sits at 16%, an extremely comfortable number that shows that it can pay its dividend.
The next year is set to see EPS grow by 12.4%. 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.
View our latest analysis for First Bank
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 2016, the dividend has gone from $0.08 total annually to $0.24. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. First Bank has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It’s encouraging to see that First Bank has been growing its earnings per share at 17% a year over the past five years. First Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Overall, we like to see the dividend staying consistent, and we think First Bank might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. 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.
