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Business First Bancshares, Inc. (NASDAQ:BFST) will pay a dividend of $0.14 on the 30th of November. This means the annual payment will be 2.1% of the current stock price, which is lower than the industry average.
See our latest analysis for Business First Bancshares
Business First Bancshares' Earnings Will Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Business First Bancshares has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 24% also shows that Business First Bancshares is able to comfortably pay dividends.
The next 3 years are set to see EPS grow by 52.7%. The future payout ratio could be 22% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Business First Bancshares Doesn't Have A Long Payment History
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. Since 2017, the annual payment back then was $0.32, compared to the most recent full-year payment of $0.56. This implies that the company grew its distributions at a yearly rate of about 8.3% over that duration. Business First Bancshares has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.
Business First Bancshares May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 4.0% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
An additional note is that the company has been raising capital by issuing stock equal to 16% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
In Summary
Overall, a consistent dividend is a good thing, and we think that Business First Bancshares has the ability to continue this into the future. 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.