The board of First Bank (NASDAQ:FRBA) has announced that it will pay a dividend on the 20th of August, with investors receiving US$0.03 per share. This payment means the dividend yield will be 0.9%, which is below the average for the industry.
First Bank's Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, First Bank was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 32.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 8.2%, which is in the range that makes us comfortable with the sustainability of the dividend.
First Bank Doesn't Have A Long Payment History
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. The first annual payment during the last 5 years was US$0.08 in 2016, and the most recent fiscal year payment was US$0.12. This means that it has been growing its distributions at 8.4% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider First Bank to be a consistent dividend paying stock.
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. We are encouraged to see that First Bank has grown earnings per share at 29% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
First Bank Looks Like A Great Dividend Stock
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. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 First Bank analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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