First Capital (NASDAQ:FCAP) Has Affirmed Its Dividend Of $0.26

First Capital, Inc. (NASDAQ:FCAP) will pay a dividend of $0.26 on the 30th of December. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.

View our latest analysis for First Capital

First Capital's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, First Capital 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 31%, which means that First Capital would be able to pay its last dividend without pressure on the balance sheet.

If the trend of the last few years continues, EPS will grow by 7.8% over the next 12 months. If the dividend continues on this path, the future payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

First Capital Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was $0.76, compared to the most recent full-year payment of $1.04. This means that it has been growing its distributions at 3.2% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that First Capital has grown earnings per share at 7.8% per year over the past five years. First Capital definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

First Capital Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for First Capital that investors need to be conscious of moving forward. 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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