First Interstate BancSystem (NASDAQ:FIBK) Is Due To Pay A Dividend Of $0.47

The board of First Interstate BancSystem, Inc. (NASDAQ:FIBK) has announced that it will pay a dividend on the 22nd of May, with investors receiving $0.47 per share. Based on this payment, the dividend yield on the company's stock will be 7.0%, which is an attractive boost to shareholder returns.

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First Interstate BancSystem's Earnings Will Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained.

First Interstate BancSystem has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 89%, which means that First Interstate BancSystem would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 28.4% over the next 3 years. Despite the current payout ratio being slightly elevated, analysts estimate the future payout ratio will be 70% over the same time period, which would make us comfortable with the sustainability of the dividend.

See our latest analysis for First Interstate BancSystem

First Interstate BancSystem Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $0.64, compared to the most recent full-year payment of $1.88. 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 May Be Hard To Achieve

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 Interstate BancSystem's EPS has declined at around 4.4% a year. 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.

Our Thoughts On First Interstate BancSystem's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think First Interstate BancSystem is a great stock to add to your portfolio if income is your focus.

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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 7 analysts we track are forecasting for the future. 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.