First International Bank of Israel (TLV:FIBI) Has Announced That It Will Be Increasing Its Dividend To ₪2.19

First International Bank of Israel Ltd's (TLV:FIBI) dividend will be increasing from last year's payment of the same period to ₪2.19 on 1st of June. This will take the annual payment to 5.1% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for First International Bank of Israel

First International Bank of Israel's Earnings Will Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much.

First International Bank of Israel has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First International Bank of Israel's payout ratio of 29% is a good sign for current shareholders as this means that earnings decently cover dividends.

Looking forward, earnings per share could rise by 24.9% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the future payout ratio could be 42% by next year, which is in a pretty sustainable range.

First International Bank of Israel's Dividend Has Lacked Consistency

Looking back, First International Bank of Israel's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ₪1.30 in 2016 to the most recent total annual payment of ₪7.28. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. First International Bank of Israel has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. First International Bank of Israel has impressed us by growing EPS at 25% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

First International Bank of Israel Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for First International Bank of Israel that you should be aware of before investing. Is First International Bank of Israel 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.