First Business Financial Services (NASDAQ:FBIZ) Is Paying Out A Larger Dividend Than Last Year

First Business Financial Services, Inc. (NASDAQ:FBIZ) will increase its dividend on the 17th of February to US$0.20. This makes the dividend yield about the same as the industry average at 2.2%.

See our latest analysis for First Business Financial Services

First Business Financial Services' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, First Business Financial Services' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 15.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 22%, which we are pretty comfortable with and we think is feasible on an earnings basis.

First Business Financial Services Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.14 in 2012, and the most recent fiscal year payment was US$0.79. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. First Business Financial Services has seen EPS rising for the last five years, at 20% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for First Business Financial Services' prospects of growing its dividend payments in the future.

We Really Like First Business Financial Services' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for First Business Financial Services 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 performing dividend stock.

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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.