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First Bancorp (NASDAQ:FBNC) stock is about to trade ex-dividend in three days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Accordingly, First Bancorp investors that purchase the stock on or after the 31st of March will not receive the dividend, which will be paid on the 25th of April.
The company's next dividend payment will be US$0.22 per share. Last year, in total, the company distributed US$0.88 to shareholders. Last year's total dividend payments show that First Bancorp has a trailing yield of 2.1% on the current share price of US$41.21. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see First Bancorp paying out a modest 48% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
View our latest analysis for First Bancorp
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. First Bancorp's earnings per share have fallen at approximately 10.0% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, First Bancorp has lifted its dividend by approximately 11% a year on average.
To Sum It Up
Is First Bancorp worth buying for its dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We think there are likely better opportunities out there.
Ever wonder what the future holds for First Bancorp? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow