First Bank (NASDAQ:FRBA) will pay a dividend of $0.06 on the 25th of August. Including this payment, the dividend yield on the stock will be 1.9%, which is a modest boost for shareholders' returns.
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 Bank's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for First Bank
First Bank's Earnings Will Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive.
First Bank has a good history of paying out dividends, with its current track record at 7 years. While past data isn't a guarantee for the future, First Bank's latest earnings report puts its payout ratio at 14%, showing that the company can pay out its dividends comfortably.
Looking forward, earnings per share is forecast to fall by 1.1% over the next year. But if the dividend continues along recent trends, we estimate the future payout ratio could be 17%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.
First Bank Doesn't Have A Long Payment History
First Bank's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the annual payment back then was $0.08, compared to the most recent full-year payment of $0.24. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that First Bank has been growing its earnings per share at 22% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
First Bank Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think First Bank might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.