First Bank (NASDAQ:FRBA) Is Paying Out A Dividend Of $0.06

The board of First Bank (NASDAQ:FRBA) has announced that it will pay a dividend on the 26th of May, with investors receiving $0.06 per share. The dividend yield is 2.6% based on this payment, which is a little bit low compared to the other companies in the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. First Bank's stock price has reduced by 35% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for First Bank

First Bank's Payment Expected To Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end.

Having paid out dividends for 6 years, First Bank has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, First Bank's payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share is forecast to rise by 11.1% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

First Bank Doesn't Have A Long Payment History

It is great to see that First Bank has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was $0.08, compared to the most recent full-year payment of $0.24. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. First Bank has seen EPS rising for the last five years, at 25% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like First Bank's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've picked out 1 warning sign for First Bank that investors should know about before committing capital to this stock. Is First Bank 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.