Business First Bancshares' (NASDAQ:BFST) Dividend Will Be $0.14

Business First Bancshares, Inc. (NASDAQ:BFST) has announced that it will pay a dividend of $0.14 per share on the 30th of November. This payment means the dividend yield will be 2.1%, which is below the average for the industry.

Check out our latest analysis for Business First Bancshares

Business First Bancshares' Earnings Will Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Business First Bancshares has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. Using data from its latest earnings report, Business First Bancshares' payout ratio sits at 24%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to expand by 52.7%. Analysts forecast the future payout ratio could be 22% over the same time horizon, which is a number we think the company can maintain.

Business First Bancshares Doesn't Have A Long Payment History

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 2017, the annual payment back then was $0.32, compared to the most recent full-year payment of $0.56. This means that it has been growing its distributions at 8.3% per annum over that time. Business First Bancshares has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.0% per annum over the last five years, which admittedly is a bit slow. If Business First Bancshares is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

An additional note is that the company has been raising capital by issuing stock equal to 16% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Business First Bancshares that you should be aware of before investing. 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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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.