First Bancorp's (NASDAQ:FNLC) Dividend Will Be Increased To $0.35

The board of The First Bancorp, Inc. (NASDAQ:FNLC) has announced that the dividend on 20th of July will be increased to $0.35, which will be 2.9% higher than last year's payment of $0.34 which covered the same period. This will take the dividend yield to an attractive 5.5%, providing a nice boost to shareholder returns.

See our latest analysis for First Bancorp

First Bancorp's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

First Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on First Bancorp's last earnings report, the payout ratio is at a decent 40%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS could expand by 12.1% if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

First Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.78, compared to the most recent full-year payment of $1.36. This implies that the company grew its distributions at a yearly rate of about 5.7% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that First Bancorp has grown earnings per share at 12% 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 Bancorp's prospects of growing its dividend payments in the future.

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income 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. Now, if you want to look closer, it would be worth checking out our free research on First Bancorp management tenure, salary, and performance. 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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