First Capital (NASDAQ:FCAP) Will Pay A Larger Dividend Than Last Year At $0.31

The board of First Capital, Inc. (NASDAQ:FCAP) has announced that it will be increasing its dividend by 6.9% on the 26th of September to $0.31, up from last year's comparable payment of $0.29. This makes the dividend yield about the same as the industry average at 3.0%.

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

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

First Capital has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Capital's payout ratio of 29% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS could expand by 5.9% if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for First Capital

First Capital Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.84 total annually to $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 3.3% a year 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

Investors could be attracted to the stock based on the quality of its payment history. First Capital has impressed us by growing EPS at 5.9% per 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, a dividend increase is always good, and we think that First Capital is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. See if management have their own wealth at stake, by checking insider shareholdings in First Capital stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.