First Bancshares (NASDAQ:FBMS) Is Increasing Its Dividend To $0.21

The First Bancshares, Inc. (NASDAQ:FBMS) will increase its dividend from last year's comparable payment on the 24th of February to $0.21. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.

View our latest analysis for First Bancshares

First Bancshares' Dividend Forecasted To Be Well Covered By Earnings

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

First Bancshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but First Bancshares' payout ratio of 27% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 53.1%. The future payout ratio could be 23% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

First Bancshares Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.15 in 2013, and the most recent fiscal year payment was $0.84. This means that it has been growing its distributions at 19% per annum 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that First Bancshares has been growing its earnings per share at 19% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for First Bancshares' prospects of growing its dividend payments in the future.

We should note that First Bancshares has issued stock equal to 14% 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 First Bancshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for First Bancshares that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.