First Bancorp (NASDAQ:FBNC) Is Increasing Its Dividend To $0.23

The board of First Bancorp (NASDAQ:FBNC) has announced that the dividend on 25th of July will be increased to $0.23, which will be 4.5% higher than last year's payment of $0.22 which covered the same period. This takes the annual payment to 2.2% of the current stock price, which unfortunately is below what the industry is paying.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

First Bancorp's Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

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 42% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to expand by 29.0%. If the dividend continues along recent trends, we estimate the future payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for First Bancorp

First Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.32 in 2015, and the most recent fiscal year payment was $0.88. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Is Doubtful

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. Over the past five years, it looks as though First Bancorp's EPS has declined at around 6.7% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. 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

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. 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. However, there are other things to consider for investors when analysing stock performance. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 4 analysts we track are forecasting for the future. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.