First Bancorp (NASDAQ:FBNC) Has Announced A 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 payment means the dividend yield will be 2.2%, which is below the average for the industry.

See our latest analysis for First Bancorp

First Bancorp's Dividend Forecasted To Be Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be 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. Past distributions do not necessarily guarantee future ones, but First Bancorp's payout ratio of 48% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 116.0%. The future payout ratio could be 27% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

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 2015, the dividend has gone from $0.32 total annually to $0.88. This means that it has been growing its distributions at 11% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. First Bancorp has seen earnings per share falling at 10.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, we think First Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 3 analysts are forecasting a turnaround in our free collection of analyst estimates here. 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.