First Bank's (NASDAQ:FRBA) Dividend Will Be $0.06

First Bank (NASDAQ:FRBA) has announced that it will pay a dividend of $0.06 per share on the 24th of November. This payment means the dividend yield will be 2.2%, which is below the average for the industry.

Check out our latest analysis for First Bank

First Bank's Earnings Will Easily Cover The Distributions

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 a good history of paying out dividends, with its current track record at 7 years. While past records don't necessarily translate into future results, the company's payout ratio of 14% also shows that First Bank is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to fall by 3.1% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 15% over the same time horizon, 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 annual payment during the last 7 years was $0.08 in 2016, and the most recent fiscal year payment was $0.24. This means that it has been growing its distributions at 17% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. First Bank has impressed us by growing EPS at 15% 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 Bank's prospects of growing its dividend payments in the future.

We should note that First Bank has issued stock equal to 28% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like First Bank's Dividend

Overall, we like to see the dividend staying consistent, and we think First Bank might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for First Bank that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.