First Bank (NASDAQ:FRBA) Will Pay A Dividend Of $0.06

The board of First Bank (NASDAQ:FRBA) has announced that it will pay a dividend on the 24th of May, with investors receiving $0.06 per share. Including this payment, the dividend yield on the stock will be 2.1%, which is a modest boost for shareholders' returns.

Check out our latest analysis for First Bank

First Bank's Dividend Forecasted To Be Well Covered By Earnings

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 Bank has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, First Bank's latest earnings report puts its payout ratio at 21%, showing that the company can pay out its dividends comfortably.

Looking forward, earnings per share is forecast to rise by 22.4% over the next year. If the dividend continues along recent trends, we estimate the future payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.

First Bank Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2017, the dividend has gone from $0.08 total annually to $0.24. This means that it has been growing its distributions at 17% per annum over that time. First Bank has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

First Bank May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, First Bank's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, First Bank has the option to increase the payout ratio to return more cash to shareholders.

An additional note is that the company has been raising capital by issuing stock equal to 28% 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.

In Summary

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. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for First Bank that investors should know about before committing capital to this stock. 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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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.