First Business Financial Services' (NASDAQ:FBIZ) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of First Business Financial Services, Inc. (NASDAQ:FBIZ) has announced that it will be paying its dividend of $0.2275 on the 18th of May, an increased payment from last year's comparable dividend. This takes the annual payment to 3.5% of the current stock price, which is about average for the industry.

See our latest analysis for First Business Financial Services

First Business Financial Services' Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Having distributed dividends for at least 10 years, First Business Financial Services has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 17% also shows that First Business Financial Services is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to fall by 2.6% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 20%, which we are pretty comfortable with and we think would be 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. Since 2013, the dividend has gone from $0.14 total annually to $0.91. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

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 impressed us by growing EPS at 28% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like First Business Financial Services' Dividend

Overall, a dividend increase is always good, and we think that First Business Financial Services is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for First Business Financial Services that investors should take into consideration. Is First Business Financial Services not quite the opportunity you were looking for? Why not check out our selection of top 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.