First International Bank of Israel (TLV:FIBI) Is Increasing Its Dividend To ₪2.67

The board of First International Bank of Israel Ltd (TLV:FIBI) has announced that it will be increasing its dividend by 62% on the 4th of April to ₪2.67, up from last year's comparable payment of ₪1.64. This will take the annual payment to 5.3% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for First International Bank of Israel

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

First International Bank of Israel has a good history of paying out dividends, with its current track record at 7 years. Based on First International Bank of Israel's last earnings report, the payout ratio is at a decent 44%, meaning that the company is able to pay out its dividend with a bit of room to spare.

If the trend of the last few years continues, EPS will grow by 19.7% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

First International Bank of Israel's Dividend Has Lacked Consistency

First International Bank of Israel has been paying dividends for a while, but the track record isn't stellar. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. First International Bank of Israel has impressed us by growing EPS at 20% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like First International Bank of Israel's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for First International Bank of Israel that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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