First Capital (NASDAQ:FCAP) Has Affirmed Its Dividend Of $0.27

The board of First Capital, Inc. (NASDAQ:FCAP) has announced that it will pay a dividend of $0.27 per share on the 28th of June. This payment means that the dividend yield will be 3.6%, which is around the industry average.

View our latest analysis for First Capital

First Capital's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

First Capital has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on First Capital's last earnings report, the payout ratio is at a decent 30%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share could rise by 5.0% over the next year if the trend from the last few years continues. 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

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.80 in 2014, and the most recent fiscal year payment was $1.08. This means that it has been growing its distributions at 3.0% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

First Capital Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that First Capital has been growing its earnings per share at 5.0% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Taking the debate a bit further, we've identified 1 warning sign for First Capital that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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