First Bancorp (NASDAQ:FBNC) Has Affirmed Its Dividend Of $0.22

First Bancorp (NASDAQ:FBNC) has announced that it will pay a dividend of $0.22 per share on the 25th of October. Based on this payment, the dividend yield will be 3.1%, which is fairly typical for the industry.

Check out our latest analysis for First Bancorp

First Bancorp's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, First Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 28%, which means that First Bancorp would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 8.2% over the next 12 months. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 37%, which would be comfortable for the company to continue in the future.

First Bancorp 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. Since 2013, the annual payment back then was $0.32, compared to the most recent full-year payment of $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, First Bancorp has only grown its earnings per share at 3.2% per annum over the past five years. While growth may be thin on the ground, First Bancorp could always pay out a higher proportion of earnings to increase shareholder returns.

We should note that First Bancorp has issued stock equal to 15% 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 Bancorp's Dividend

Overall, we like to see the dividend staying consistent, and we think First Bancorp might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for First Bancorp (of which 1 makes us a bit uncomfortable!) you should know about. Is First Bancorp 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.