First Interstate BancSystem (NASDAQ:FIBK) Will Pay A Dividend Of $0.47

First Interstate BancSystem, Inc. (NASDAQ:FIBK) has announced that it will pay a dividend of $0.47 per share on the 14th of November. Based on this payment, the dividend yield on the company's stock will be 5.9%, which is an attractive boost to shareholder returns.

See our latest analysis for First Interstate BancSystem

First Interstate BancSystem's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, First Interstate BancSystem has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Interstate BancSystem's payout ratio of 82% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 21.5%. Analyst estimates also show the future payout ratio being 74% in the same 3 years which brings it into quite a comfortable range.

First Interstate BancSystem 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 $0.56 in 2014, and the most recent fiscal year payment was $1.88. This means that it has been growing its distributions at 13% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. It's not great to see that First Interstate BancSystem's earnings per share has fallen at approximately 3.6% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about First Interstate BancSystem's payments, as there could be some issues with sustaining them into the future. 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. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for First Interstate BancSystem that you should be aware of before investing. Is First Interstate BancSystem not quite the opportunity you were looking for? Why not check out our selection of top 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.