Readers hoping to buy The First Bancorp, Inc. (NASDAQ:FNLC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 6th of January will not receive the dividend, which will be paid on the 17th of January.
First Bancorp’s next dividend payment will be US$0.30 per share. Last year, in total, the company distributed US$1.20 to shareholders. Based on the last year’s worth of payments, First Bancorp stock has a trailing yield of around 4.0% on the current share price of $30.23. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. First Bancorp paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we’re glad to see First Bancorp’s earnings per share have risen 14% per annum over the last five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, First Bancorp has lifted its dividend by approximately 4.4% a year on average. It’s good to see both earnings and the dividend have improved – although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
From a dividend perspective, should investors buy or avoid First Bancorp? Earnings per share are growing at an attractive rate, and First Bancorp is paying out a bit over half its profits. Overall, First Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Want to learn more about First Bancorp? Here’s a visualisation of its historical rate of revenue and earnings growth.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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