First Bancorp (NASDAQ:FNLC) Is Increasing Its Dividend To $0.36

The board of The First Bancorp, Inc. (NASDAQ:FNLC) has announced that the dividend on 19th of July will be increased to $0.36, which will be 2.9% higher than last year's payment of $0.35 which covered the same period. This takes the dividend yield to 5.7%, which shareholders will be pleased with.

See our latest analysis for First Bancorp

First Bancorp's Payment Expected To Have Solid Earnings Coverage

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 Bancorp has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Bancorp's payout ratio of 56% is a good sign as this means that earnings decently cover dividends.

Over the next year, EPS could expand by 2.0% if recent trends continue. If the dividend continues on this path, the future payout ratio could be 59% by next year, which we think can be pretty sustainable going forward.

First Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.78 in 2014, and the most recent fiscal year payment was $1.40. This works out to be a compound annual growth rate (CAGR) of approximately 6.0% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 2.0% per year. First Bancorp is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

First Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in First Bancorp in our latest insider ownership analysis. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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