First US Bancshares (NASDAQ:FUSB) Is Paying Out A Larger Dividend Than Last Year

First US Bancshares, Inc.'s (NASDAQ:FUSB) dividend will be increasing from last year's payment of the same period to $0.05 on 2nd of October. This takes the annual payment to 2.3% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for First US Bancshares

First US Bancshares' Payment Expected To Have Solid Earnings Coverage

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

First US Bancshares has a good history of paying out dividends, with its current track record at 9 years. Using data from its latest earnings report, First US Bancshares' payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share could rise by 29.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the future payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

First US Bancshares Doesn't Have A Long Payment History

It is great to see that First US Bancshares 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. Since 2014, the annual payment back then was $0.04, compared to the most recent full-year payment of $0.20. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. First US Bancshares 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. First US Bancshares has seen EPS rising for the last five years, at 29% per annum. 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

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for First US Bancshares that investors should take into consideration. 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.