Business First Bancshares (NASDAQ:BFST) Has Announced A Dividend Of $0.14

The board of Business First Bancshares, Inc. (NASDAQ:BFST) has announced that it will pay a dividend on the 31st of May, with investors receiving $0.14 per share. This payment means the dividend yield will be 2.5%, which is below the average for the industry.

We've discovered 1 warning sign about Business First Bancshares. View them for free.

Business First Bancshares' Payment Expected To Have Solid Earnings Coverage

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

Business First Bancshares has established itself as a dividend paying company, given its 7-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 23%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS is forecast to expand by 9.3%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 26% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Business First Bancshares

Business First Bancshares Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.32 in 2018 to the most recent total annual payment of $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. 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 Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Business First Bancshares has seen EPS rising for the last five years, at 5.8% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

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. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Business First Bancshares that investors need to be conscious of moving forward. Is Business First Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.