First United (NASDAQ:FUNC) Has Affirmed Its Dividend Of $0.20

First United Corporation (NASDAQ:FUNC) has announced that it will pay a dividend of $0.20 per share on the 1st of May. This payment means that the dividend yield will be 3.7%, which is around the industry average.

Check out our latest analysis for First United

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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

First United has established itself as a dividend paying company, given its 6-year history of distributing earnings to shareholders. Based on First United's last earnings report, the payout ratio is at a decent 35%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 62.1% over the next 3 years. Analysts estimate the future payout ratio will be 25% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

First United Is Still Building Its Track Record

It is great to see that First United 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. The dividend has gone from an annual total of $0.36 in 2018 to the most recent total annual payment of $0.80. This implies that the company grew its distributions at a yearly rate of about 14% 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.

We Could See First United's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. First United has impressed us by growing EPS at 8.5% per year over the past five years. First United definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like First United's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. As an example, we've identified 2 warning signs for First United that you should be aware of before investing. 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.