First Bancshares' (NASDAQ:FBMS) Upcoming Dividend Will Be Larger Than Last Year's

The First Bancshares, Inc. (NASDAQ:FBMS) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of May to $0.22. This makes the dividend yield about the same as the industry average at 3.5%.

Check out our latest analysis for First Bancshares

First Bancshares' Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

First Bancshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 32%, which means that First Bancshares would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 18.7%. If the dividend continues along recent trends, we estimate the future payout ratio will be 44%, 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 been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.15 in 2013 to the most recent total annual payment of $0.88. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. 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.

We Could See First Bancshares' Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that First Bancshares has been growing its earnings per share at 8.3% 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.

An additional note is that the company has been raising capital by issuing stock equal to 53% 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.

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for First Bancshares that you should be aware of before investing. 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.