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

Business First Bancshares, Inc. (NASDAQ:BFST) has announced that it will pay a dividend of $0.12 per share on the 28th of February. The dividend yield is 2.3% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Business First Bancshares

Business First Bancshares' Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having paid out dividends for 5 years, Business First Bancshares has a good history of paying out a part of its 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 21.3%. Analysts estimate the future payout ratio will be 21% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Business First Bancshares Doesn't Have A Long Payment History

Business First Bancshares' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.32 in 2018 to the most recent total annual payment of $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year 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.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Business First Bancshares has grown earnings per share at 27% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We should note that Business First Bancshares has issued stock equal to 23% of shares outstanding. 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.

We Really Like Business First Bancshares' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Business First Bancshares that investors need to be conscious of moving forward. 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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