Business First Bancshares (NASDAQ:BFST) Has Announced A Dividend Of $0.12

Business First Bancshares, Inc. (NASDAQ:BFST) will pay a dividend of $0.12 on the 30th of November. This payment means the dividend yield will be 2.0%, which is below the average for the industry.

Check out the opportunities and risks within the US Banks industry.

Business First Bancshares' Payment Expected To Have Solid Earnings Coverage

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 5-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Business First Bancshares' latest earnings report puts its payout ratio at 21%, showing that the company can pay out its dividends comfortably.

The next 3 years are set to see EPS grow by 51.5%. The future payout ratio could be 20% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

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. The dividend has gone from an annual total of $0.32 in 2017 to the most recent total annual payment of $0.48. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. Business First Bancshares has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Business First Bancshares has been growing its earnings per share at 13% a year over the past five years. Business First Bancshares definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

An additional note is that the company has been raising capital by issuing stock equal to 23% 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.

Business First Bancshares Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Business First Bancshares 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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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.