First US Bancshares (NASDAQ:FUSB) Is Increasing Its Dividend To $0.05

The board of First US Bancshares, Inc. (NASDAQ:FUSB) has announced that it will be paying its dividend of $0.05 on the 3rd of April, an increased payment from last year's comparable dividend. This takes the annual payment to 2.0% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for First US Bancshares

First US Bancshares' Earnings Will Easily Cover The Distributions

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

First US Bancshares has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, First US Bancshares' latest earnings report puts its payout ratio at 12%, showing that the company can pay out its dividends comfortably.

If the trend of the last few years continues, EPS will grow by 33.8% over the next 12 months. If the dividend continues on this path, the future payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

First US Bancshares 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. The annual payment during the last 8 years was $0.04 in 2015, and the most recent fiscal year payment was $0.20. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. 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. We are encouraged to see that First US Bancshares has grown earnings per share at 34% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

First US Bancshares Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for First US Bancshares that you should be aware of before investing. Is First US Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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