First Mid Bancshares (NASDAQ:FMBH) Has Affirmed Its Dividend Of $0.23

The board of First Mid Bancshares, Inc. (NASDAQ:FMBH) has announced that it will pay a dividend on the 1st of December, with investors receiving $0.23 per share. This means the dividend yield will be fairly typical at 2.9%.

See our latest analysis for First Mid Bancshares

First Mid Bancshares' Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

First Mid Bancshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on First Mid Bancshares' last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 8.7%. Analysts estimate the future payout ratio will be 27% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was $0.42, compared to the most recent full-year payment of $0.92. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. First Mid Bancshares might have put its house in order since then, but we remain cautious.

We Could See First Mid Bancshares' Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. First Mid Bancshares has impressed us by growing EPS at 5.5% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for First Mid Bancshares' prospects of growing its dividend payments in the future.

An additional note is that the company has been raising capital by issuing stock equal to 17% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On First Mid Bancshares' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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 2 warning signs for First Mid Bancshares that you should be aware of before investing. 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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