FirstCash Holdings (NASDAQ:FCFS) Is Paying Out A Larger Dividend Than Last Year

FirstCash Holdings, Inc. (NASDAQ:FCFS) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of August to $0.35. Even though the dividend went up, the yield is still quite low at only 1.5%.

View our latest analysis for FirstCash Holdings

FirstCash Holdings' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, FirstCash Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 43.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

FirstCash Holdings Is Still Building Its Track Record

It is great to see that FirstCash Holdings 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 2016, the annual payment back then was $0.50, compared to the most recent full-year payment of $1.40. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. FirstCash Holdings 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.

We Could See FirstCash Holdings' Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. FirstCash Holdings has seen EPS rising for the last five years, at 7.2% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for FirstCash Holdings 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.