A Look at First BanCorp (FBP) Valuation After Boosting Its Dividend Yield Above Sector and S&P 500 Averages

If you’ve been watching First BanCorp (NYSE:FBP), you already know that dividend announcements can really get the market talking. The latest event to stir things up is that First BanCorp just raised its annualized dividend, now offering a yield that outpaces both its industry peers and the S&P 500. With dividends on the rise for five straight years, this increase seems to signal more than just confidence. It is a clear message from management about the bank’s view of its future earning power. So, how has the stock responded? The share price has climbed 10% over the past year, and is up more than 8% in the past three months, riding on momentum built in part by improving earnings and that steady string of dividend hikes. Compared to other names in the sector, First BanCorp’s reputation for returning value to shareholders stands out, and investors seem to be taking note, particularly as dividend growth continues to exceed broader market averages. But here is the big question as we look closer at the numbers: does all this dividend optimism make First BanCorp a bargain, or has the market already priced in its next leg of growth?

Most Popular Narrative: 11.7% Undervalued

According to the most popular narrative, First BanCorp appears to be undervalued by a significant margin based on analysts’ growth and profitability projections. This bullish view reflects optimism around the bank’s evolving fundamentals and the economic backdrop.

Favorable labor market conditions and improving consumer health are reducing credit losses, as seen in lower net charge-offs and stable or improving asset quality metrics. These trends could support more stable and higher earnings in the future.

Want to know what’s fueling this upbeat valuation? There is a surprising set of numbers analysts are banking on, especially regarding how much profit and revenue could accelerate in the coming years. Which financial levers matter most for that double-digit price target gap, and what assumptions are built into their calculations? Discover the unique growth drivers and forecast shifts powering this bold narrative.

Result: Fair Value of $25.00 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent demographic stagnation or a lack of geographic diversification could quickly undermine optimism. This could expose First BanCorp to more volatile returns and growth.

Find out about the key risks to this First BanCorp narrative.

Another View: Discounted Cash Flow Model

Taking a step back from market multiples, the SWS DCF model offers a different perspective. This method also signals undervaluation, but it relies on future cash flow projections that can change quickly. Which approach do you trust more?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out First BanCorp for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own First BanCorp Narrative

If you have a different perspective or want to dive into the details yourself, it's simple to build your own take on First BanCorp in just a few minutes. Do it your way

A great starting point for your First BanCorp research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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