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 April. This means the dividend yield will be fairly typical at 2.6%.

See our latest analysis for First Bancorp

First Bancorp's Payment Expected To Have Solid Earnings Coverage

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 Bancorp has a long history of paying out a part of its earnings to shareholders. Based on First Bancorp's last earnings report, the payout ratio is at a decent 35%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 25.7%. Analysts forecast the future payout ratio could be 31% over the same time horizon, which is a number we think the company can maintain.

First Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.32 in 2014, and the most recent fiscal year payment was $0.88. This means that it has been growing its distributions at 11% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

First Bancorp May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though First Bancorp's EPS has declined at around 3.6% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Taking the debate a bit further, we've identified 1 warning sign for First Bancorp that investors need to be conscious of moving forward. 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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