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The board of The First Bancshares, Inc. (NYSE:FBMS) has announced that it will pay a dividend of $0.25 per share on the 23rd of August. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that First Bancshares' stock price has increased by 38% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Check out our latest analysis for First Bancshares
First Bancshares' Payment Expected To Have Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.
Having distributed dividends for at least 10 years, First Bancshares has a long history of paying out a part of its earnings to shareholders. Based on First Bancshares' last earnings report, the payout ratio is at a decent 41%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next 3 years, EPS is forecast to expand by 18.3%. Analysts forecast the future payout ratio could be 36% over the same time horizon, which is a number we think the company can maintain.
First Bancshares Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $0.15 total annually to $1.00. This means that it has been growing its distributions at 21% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 2.9% per annum over the last five years, which admittedly is a bit slow. Growth of 2.9% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
We Really Like First Bancshares' Dividend
Overall, a dividend increase is always good, and we think that First Bancshares is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.