First Mid Bancshares' (NASDAQ:FMBH) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of First Mid Bancshares, Inc. (NASDAQ:FMBH) has announced that it will be paying its dividend of $0.23 on the 1st of September, an increased payment from last year's comparable dividend. This takes the annual payment to 2.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for First Mid Bancshares

First Mid Bancshares' Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

First Mid Bancshares has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past data isn't a guarantee for the future, First Mid Bancshares' latest earnings report puts its payout ratio at 24%, showing that the company can pay out its dividends comfortably.

Looking forward, EPS is forecast to rise by 25.5% over the next 3 years. The future payout ratio could be 21% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the annual payment back then was $0.38, compared to the most recent full-year payment of $0.92. This means that it has been growing its distributions at 9.2% per annum 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. First Mid Bancshares has seen EPS rising for the last five years, at 8.9% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

An additional note is that the company has been raising capital by issuing stock equal to 13% 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.

First Mid Bancshares Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that First Mid Bancshares 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 of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for First Mid Bancshares that investors should take into consideration. 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.