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

The board of Business First Bancshares, Inc. (NASDAQ:BFST) has announced that it will pay a dividend of $0.12 per share on the 31st of May. This means that the annual payment will be 3.2% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Business First Bancshares

Business First Bancshares' Earnings Will Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Business First Bancshares has established itself as a dividend paying company, given its 5-year history of distributing earnings to shareholders. Using data from its latest earnings report, Business First Bancshares' payout ratio sits at 20%, an extremely comfortable number that shows that it can pay its dividend.

EPS is set to fall by 5.2% over the next 12 months. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 26%, which would be comfortable for the company to continue in the future.

Business First Bancshares Is Still Building Its Track Record

It is great to see that Business First Bancshares has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. 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. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Business First Bancshares to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Business First Bancshares has grown earnings per share at 27% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We should note that Business First Bancshares has issued stock equal to 12% 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 generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. For example, we've identified 3 warning signs for Business First Bancshares (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.