First Bancshares (NASDAQ:FBMS) Has Announced That It Will Be Increasing Its Dividend To $0.24

The board of The First Bancshares, Inc. (NASDAQ:FBMS) has announced that it will be paying its dividend of $0.24 on the 24th of November, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 4.0%.

See our latest analysis for First Bancshares

First Bancshares' Payment Expected To Have Solid Earnings Coverage

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

First Bancshares has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 33%, which means that First Bancshares would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 14.6% over the next 3 years. Analysts estimate the future payout ratio will be 32% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

First Bancshares Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.15 in 2013 to the most recent total annual payment of $0.96. This means that it has been growing its distributions at 20% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income 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. First Bancshares has seen EPS rising for the last five years, at 13% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We should note that First Bancshares has issued stock equal to 31% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We Really Like First Bancshares' Dividend

Overall, a dividend increase is always good, and we think that First Bancshares is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for First Bancshares that investors should take into consideration. Is First Bancshares 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.